Updates underscore China’s commitment to reducing carbon emissions despite government agency reshuffling.

By Paul A. Davies and R. Andrew Westgate

The Climate Change Department (CCD) of the newly formed Ministry of Ecology and Environment (MEE) has announced its official updates in relation to China’s low carbon-development strategy generally and the National Emissions Trading System (ETS) in particular. This announcement took place at the sixth Low Carbon Day celebration (13 June, 2018) and marked the CCD’s first public event since it was transferred to the MEE from the National Development and Reform Commission (NDRC), the state agency originally tasked with developing the ETS.

President Xi recently took the opportunity at the National Ecology and Environmental Protection Conference to stress the importance of a national climate change strategy through a governance system, in order to demonstrate China’s commitment to the cause.

Notwithstanding the restructuring of the former Ministry of Environmental Protection into MEE in the spring of 2018, the government still plans on adhering to its original timetable for the National ETS Construction Plan (Power Sector). The plan’s release coincided with the ETS launch in December 2017, and once established, the Chinese ETS will be the world’s largest carbon market.

Once the ETS expands to cover an additional seven heavy industries in addition to the power sector, approximately 25% of global CO2 emissions will fall within carbon-pricing systems. The government has demonstrated its serious commitment to reducing carbon emissions both through its proposed implementation of the ETS and by investing US$363 billion on renewable power capacity by 2020.

The most significant announced updates include:

  • A National ETS Assistance Platform has been set up to address issues in relation to historical emissions reporting as well as monitoring, reporting and verification (MRV) for 2016/17, because emissions during this period are being used to help determine the allowance allocation.
  • The government has set up a range of taskforces whose purpose is to establish the design of the registry and trading system for the ETS, evaluate how the system can be optimized and recommend how the greenhouse gas (GHG) reporting will work.
  • The China Electricity Council (CEC) has set up a power sector ETS working group to conduct research and identify problems participating entities may face, set up an allowance allocation plan, and produce technical guidance for participating power entities.
  • The government is also in the process of developing training plans for key stakeholders and participants such as local government bodies, significant emitters, and verification organizations. After the government reshuffle in April 2018, MEE will be responsible for climate change capacity training.
  • After meetings with those conducting ETS pilot programs, local agencies have been tasked with developing the ETS as their top priority.
  • The government is welcoming insight and expertise from the international community in order to improve the ETS system. Areas in which it is particularly keen for advice include, allowance allocation, risk management, and system design.

Latham will continue to monitor the progress of the Chinese ETS.