Climate Cooperation China
On behalf of the International Climate Initiative (IKI)

Ministry of Ecology and Environment (MEE) Released Updated Draft Ordinance of Chinese Carbon Emission Trading

On March 30, 2021, the MEE released an updated draft of the national emissions trading system (ETS) Ordinance for public comments by April 30, 2021. Compared with the existing “Administrative Measure for National ETS (Trial)” issued by MEE, the Ordinance will be approved and released by the State Council and have higher legal effectiveness.

The updated draft stated the ETS is now one of the policy measures to achieve the climate goals of carbon peaking and carbon neutrality. Compared with the first draft released in April 2019, the main changes are on supervision, allowance allocation, information disclosure and risk prevention and control as well as penalties. It defined that the Ordinance will only apply for the national ETS in China. It clarified the division of supervision responsibilities between the MEE and other relevant authorities such as the State Administration for Market Regulation (ASMR), the People’s Bank of China (PBoC), China Securities Regulatory and Commission (CSRC) and China Banking and Insurance Regulatory Commission (CBIRC). A cap is to be set in the national ETS and auctioning will be introduced gradually, while the initial face will still see free allocations. Furthermore, the duties of covered enterprises are described which include an obligation to monitor and report annual GHG emissions on a yearly basis. Annual emissions covered by the companies, verification reports, compliance results as well as information on registration and trading need to be disclosed by participants. The document also lists penalties up to CNY 500,000 for non-compliance and up to CNY 10 million for violation and/or market manipulation. Once the Ordinance takes effect, no additional regional ETS shall be established and the existing ones will be gradually phased out and incorporated into the national system.

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