China launches the world’s largest emissions trading scheme

Smog above the Forbidden City in central Beijing; photo: Sophia Benzman/ GIZ.

Smog above the Forbidden City in central Beijing; photo: Sophia Benzman/ GIZ.

On 19 December 2017, China officially launched its emissions trading system (ETS). While the Chinese ETS will initially cover only the electricity sector, it is already the world’s largest system of its sort. Accounting for 4.5 billion tonnes of traded CO2, the Chinese system clearly surpasses the EU’s ETS, with its approximately 2 billion tonnes. In the electricity sector alone, it covers 1,700 companies. While the initial plan was for the ETS to also include the industry and transport sectors upon its launch, these will now be added in the next few years.

Through its project Capacity Building to Support the Establishment of a National Emission Trading Scheme (ETS) in China, the International Climate Initiative (IKI) of the German Environment Ministry (BMUB) has been providing its support in this area since 2012 in the form of expert advice and training programmes. Some of the topics covered by these activities include legal frameworks, procedural structures, market surveillance, the definition of emissions ceilings, allocation mechanisms, trading platforms and carbon registries. As can be expected from such a complex trading scheme, the project focuses on ensuring that the necessary monitoring, reporting and verification (MRV) requirements are in place. It also supports regional exchanges of knowledge as well as China’s integration into international carbon market networks.

In 2017, the project organised measures such as a specialist study tour to Germany and Great Britain on the topic of ETS legislation for experts from the Shanghai pilot region alongside a joint workshop with experts from BMUB and the German Emissions Trading Authority. In the scope of these activities, China’s National Development and Reform Commission (NDRC) was able to present the ETS that it had developed. In cooperation with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and the Oeko-Institut, a policy paper was drafted for the NDRC which examines various aspects and impacts related to the design of the MRV system.

In preparation for incorporating additional sectors within the ETS, various information and training events took place for representatives from Chinese industry, such as the steel and cement sector in Guangzhou and Shenzhen, on the topic of high-quality measuring and reporting practices for greenhouse gas emissions at industrial plants. In Shenzhen, the project supported the development and adaptation of technical guidelines for measuring and reporting on greenhouse gas emissions for bus and taxi fleets.

Emissions trading is set to actually commence in 2020. The IKI project will therefore continue to support China’s ETS until 2019.

Illustration from IKI Review of Activities 2015-2016, page 31, image: SCHUMACHER

IKI Review of Activities 2015-2016