China to launch national emissions trading scheme

China will launch a long-delayed national emissions trading scheme (ETS) next month after the ecology and environment ministry published the final version of regulations governing the scheme.

The regulations were published yesterday and will take effect by 1 February, enabling eligible entities to start trading by that date and kicking off what could become the world's largest ETS.

All entities that emitted more than 26,000t of CO2 equivalent in any single year from 2013-19 will be covered by the ETS, according to the regulations, in line with the consultation draft released in November.

The ETS will initially apply mainly to power plants. The environment ministry published guidelines on the distribution of emission quotas to a total of 2,225 coal- and gas-fired power plants as well as manufacturing facilities with captive power plants.

Several refineries are also covered by the ETS, including state-controlled Sinopec's 320,000 b/d Shanghai and 470,000 b/d Maoming Petrochemical plants, state-run PetroChina's 200,000 b/d Wepec and 180,000 b/d Jinzhou Petrochemical, state-owned Sinochem's 114,000 b/d Hongrun Petrochemical and the 400,000 b/d private-sector Hengli Petrochemical, according to a list of affected entities.

Listed entities will receive free carbon emissions quotas covering 70pc the electricity and heat produced in 2018. The actual quotas will be allocated by provincial governments after final adjustments.

Entities covered by the ETS will be able to use China certified emissions reduction (CCER) projects to offset as much as 5pc of emissions by volume. Entities will be removed from the emissions control list if annual emissions fall below 26,000 CO2e/yr for two consecutive years.

China identified an emissions-trading market as one of the top priorities for the coming year at its annual central economic work conference in December. This was the first time that emission reductions had been included in the key conference, following president Xi Jinping's pledge last year to achieve carbon neutrality by 2060.

The environment ministry is also speeding up efforts to draft an action plan for emissions to peak by 2030, and will "start to build" national emissions trading market in 2021, environment minister Huang Runqiu said this week.

The national ETS centre will be located in Shanghai and the registration system will be in Wuhan in Hubei province, Huang said.

China already operates emissions trading programmes on a pilot basis in seven cities and provinces. But moves towards a nationwide scheme had stalled since 2011.

Total trading volumes in the pilot programmes were 430mn t of CO2e of as of 2020, state media said. Most of the transactions were in Guangzhou and Shenzhen, which accounted for around 2.21mn t of CO2e or 51pc of the total.

China is also seeking chance to launch a carbon futures market as part of efforts to meet its emissions-reduction targets, a top executive at the China Securities Regulatory Commission (CSRC) said last year.