China China issues measures on carbon trading management (trial implementation)

China’s Ministry of Ecology and Environment on January 5, 2021 issued the Management Measures on Carbon Emission Trading (trial implementation), which take effect on February 1, 2021. As of November 2020, about 3,000 companies called “key emitters” in over 20 industries, including the power and steel industries, are participating in China’s pilot carbon market, which was initiated in 2011 and eventually put into operation in cities and provinces such as Beijing and Tianjin. The size of the carbon market has reached 10 billion yuan (approximately $1.5 billion). According to a source familiar with the matter, the implementation of these measures on carbon trading means that China’s carbon trading system has become fully operational. Here is an outline of the measures:

Goods traded in the carbon market

Carbon emission allowances (carbon emission quotas) are traded in the market — the measures states that “the Ministry of Ecology and Environment may introduce other articles into the market as goods traded in it”.

Entities engaged in carbon trading

“Key emitters” as well as organizations and individuals compliant with the rules for transactions involving the government trade emission allowances — entities that meet the following conditions are considered key emitters:

  • Operate in one of the industries included in the national carbon market.
  • Emit greenhouse gases equivalent to 26,000 tons or more of CO2

Allocation of emission allowances

Article 15 of the measures states that carbon emission allowances are allotted mainly through “free allocation”, but “paid allocation” may be introduced according to the relevant national requirements as necessary.

Establishment of dedicated bodies and systems

  • The Ministry of Ecology and Environment will set up bodies for national carbon emission allowance registration and national carbon trading.
  • A registry and a trading system for the carbon market will be developed as well. This trading system is planned to provide services for data recording, transactions, etc.

Definition of term

“Greenhouse gases” refers to carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6) and nitrogen trifluoride (NF3).

The full text of the measures is available at

http://www.mee.gov.cn/xxgk2018/xxgk/xxgk02/202101/t20210105_816131.html