March 29, 2019 – The Ministry of Ecology and Environment (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 emissions, 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.
– Verifiers that 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.