On the 29th of March 2019, the MEE initiated a public consultation on the draft Interim Regulations on the Management of Carbon Emissions Trading It is the first official document on China’s national ETS since its official launch in Dec. 2017.

The following is an outline of the main takeaways from the draft:

• The ETS is implemented by the MEE’s Department of Climate Change (DCC) and the local government’s Department of Ecology and Environment (DEE) which oversee the respective jurisdictions.
• In order to reach the targets of GHG emission, the MEE will work together with other relevant ministries on issues such as sectoral coverage and cap-setting. The annual emissions cap setting and allocation method of the MEE will receive feedback from other ministries and will then be approved by the State Council.
• Local governments will draw up lists of companies within their respective jurisdictions. This list will be submitted to the MEE. Moreover, each year companies will submit a monitoring plan, an emissions report and a verification report to the local government. The MEE will provide companies with a list of verifiers and will cover the costs.
• The local government is responsible for checking emission and verification reports as well as allocating allowances to companies based on national standards. After compliance, companies can either save their remaining permits for the following year or sell them.
• Institutional investors and individuals who meet the defined criteria will be allowed to trade in the market.
• The MEE is required to publish the trading data and the yearly emission and compliance information of companies regularly.
• The Ministry is also required to develop a risk management system including price limits and reactions to market manipulation.
• The MEE has the authority to introduce permit auctioning. Revenues from auctions will go into the budget of the central government. In the first version of the regulations, released in 2015, the revenue was to be earmarked for emissions-reducing activities.
• Companies that fail to monitor their emissions and companies that submit fake data will be fined around CNY 50,000 to 200,000 (EUR 6,500-30,000).
• Companies that are not in compliance will be fined two-to-five times of the average market price per ton of CO2.
• Auditors violate the trading rules will be fined CNY 20,000-100,000 (EUR 2,600-15,000)
• Companies, individuals and investors that violate trading rules such as market manipulation will be warned, fined (five-to-ten times of the illegal amount); or banned from trading for three years.
• Participants that violate the rules will be recorded in the credit system. Read more

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Sino-German Project on Capacity Building for the Establishment of ETS in China

Project country
China
Political Partners
German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU); Ministry of Ecology and Environment of the People's Republic of China (MEE)
Implementation Partners
National Center for Climate Change Strategy and International Cooperation of the People's Republic of China (NCSC)
Duration
07/2012 - 03/2020

The Chinese government has set itself the goal of reaching the peak of CO2 emissions by around 2030 and reducing CO2 emissions per unit of GDP by 60 to 65% compared to 2005 levels. To achieve these targets, China is gradually establishing a national Emission Trading System (ETS) as one of the key building blocks of its mitigation strategy. Since the start of the project in 2012, the Sino-German project “Capacity Building for the Establishment of Emissions Trading Schemes (ETS) in China” has been supporting the Chinese government in this endeavour through knowledge transfer and strengthening of the political leverage of key institutions and stakeholders required to develop and operate an ETS. Initially, the project supported the development of the regional pilots ETS. Since 2016, the focus lies on support for the roll out of the national ETS. The project is jointly implemented by GIZ and the Ministry of Ecology and Environment (MEE) of the People’s Republic of China. It is executed on behalf of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) within the framework of the International Climate Initiative (IKI) that is financing climate and biodiversity projects in developing and newly industrialising countries, as well as in countries in transition.