China implemented National Emission Trading Scheme (ETS) in 2021
Circular Ref: A(21)52
Issue Date: 16 Mar 2021
As per a recent decree (No.19) of the Ministry of Ecology and Environment, China is introducing the National Emission Trading Scheme (ETS) which is regulated by the trial Measures for the Administration of Carbon Emission Trading (Measures) which came into force on 1st February 2021. The full text of the regulation in Chinese is attached for your easy reference. The following is a summary of the key points of the Regulation:
1. The national ETS will be operated by an independent trading institute, and the final plan will be approved by the government authorities. As per the Measures, the first compliance cycle of the national ETS is from 1st January to 31st December 2021, covering the emissions of 2019 and 2020 for 22,225 firms in power sectors.
2. As per the Measures, companies with annual emissions at 26,000 tons of carbon dioxide equivalent or more will be defined as Key Emission Units by the competent authorities, which will be entitled to report carbon emissions on a regular basis and pay carbon emission quotas. A company will be removed from the list of Key Emission Units if its greenhouse emission falls below 26,000 tons of carbon dioxide equivalent for two consecutive years; or is no longer engaged in the business.
3. The Ministry of Ecological Environment shall, in accordance with the State regulations, formulate a plan to determine and allocate the total amount of carbon emission quotas, taking into account of the factors of economic growth etc.
4. The allocation of carbon emission quotas will be free of charge, and the paid allocation will be determined by the competent government authorities.
5. Key Emission Unites are required to register and open accounts in the national carbon emission registration system and will be the trading entities of the national carbon emission trading market.
6. Key Emission Units, shall, in accordance with the technical specifications for the accounting and reporting of greenhouse gas emissions formulated by the Ministry of Ecological Environment, compile a greenhouse gas emission report of the company for the previous year, indicating the amount of emissions, and report it to the competent government authorities. Key Emission Units shall ensure the authenticity, completeness and accuracy of the greenhouse gas emission report. Original copies of the report should be kept for at least five years.
7. The competent authorities of ecological environment shall organize the verification of the greenhouse emission reports of Key Emission Units and the results of the verification shall be used as the basis for clearing the carbon emission quotas of the Key Emission Units.
8. Key Emission Units shall, within the time limit prescribed by the Ministry of Ecological Environment, pay the carbon emission quotas of the previous year to the provincial competent department of ecological environment that allocates the quotas. The paid in amount shall be greater than or equal to the actual greenhouse gas emissions of the unit in the previous year confirmed by the verification results of the provincial competent department of ecological environment.
9. Key Emission Units may offset the payment of carbon emission quotas with the national certified voluntary emission reductions every year, and the offset proportion shall not exceed 5% of the carbon emission quotas to be paid.
4. The allocation of carbon emission quotas will be free of charge, and the paid allocation will be determined by the competent government authorities.
5. Key Emission Unites are required to register and open accounts in the national carbon emission registration system and will be the trading entities of the national carbon emission trading market.
6. Key Emission Units, shall, in accordance with the technical specifications for the accounting and reporting of greenhouse gas emissions formulated by the Ministry of Ecological Environment, compile a greenhouse gas emission report of the company for the previous year, indicating the amount of emissions, and report it to the competent government authorities. Key Emission Units shall ensure the authenticity, completeness and accuracy of the greenhouse gas emission report. Original copies of the report should be kept for at least five years.
7. The competent authorities of ecological environment shall organize the verification of the greenhouse emission reports of Key Emission Units and the results of the verification shall be used as the basis for clearing the carbon emission quotas of the Key Emission Units.
8. Key Emission Units shall, within the time limit prescribed by the Ministry of Ecological Environment, pay the carbon emission quotas of the previous year to the provincial competent department of ecological environment that allocates the quotas. The paid in amount shall be greater than or equal to the actual greenhouse gas emissions of the unit in the previous year confirmed by the verification results of the provincial competent department of ecological environment.
9. Key Emission Units may offset the payment of carbon emission quotas with the national certified voluntary emission reductions every year, and the offset proportion shall not exceed 5% of the carbon emission quotas to be paid.
10.Key Emission Units that fail to provide true reports or conceal their greenhouse gas emission reports, or refuse to perform their obligation of reporting greenhouse gas emissions, will be subject to a penalty ranging from RMB10,000 to RMB30,000.
11.Key Emission Units which fail to pay their carbon emission quotas in full, on time, will be subject to a penalty ranging from RMB20,000 to 30,000,
12. The definition of greenhouse gases is referring to natural and man-made gaseous components in the atmosphere that absorb and re-emit infrared radiation, including carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCS), perfluorocarbons (PFCs), sulfur hexafluoride (SF6) and nitrogen trifluoride (NF3).
11.Key Emission Units which fail to pay their carbon emission quotas in full, on time, will be subject to a penalty ranging from RMB20,000 to 30,000,
12. The definition of greenhouse gases is referring to natural and man-made gaseous components in the atmosphere that absorb and re-emit infrared radiation, including carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCS), perfluorocarbons (PFCs), sulfur hexafluoride (SF6) and nitrogen trifluoride (NF3).