China Drafts Rules for Carbon Emissions Trading Scheme

Companies will have to issue emissions reports, subject to strict disclosure and verification requirements, used to determine allowances.

China’s Ministry of Ecology and Environment (MEE) has drafted new rules for its planned national carbon emissions rights trading scheme.

“Carbon emission rights trading is a major institutional innovation that uses market mechanisms to control greenhouse gas emissions,” the MEE said.

In 2011, China launched a pilot carbon emissions trading programme in 7 provinces and cities, including Beijing. In December 2014, rules to regulate the construction of a new national carbon market were issued. The latest draft reflects efforts to update those rules.

The new draft rules also follow last week’s release of guiding opinions by five government agencies including the MEE, aimed at promoting climate investment and finance in China, including through the establishment of a carbon emissions trading market mechanism.

China plans to develop the nationwide emissions trading scheme in phases over the next five years.

Under the draft rules, companies will be required to issue ‘complete and accurate’ emissions reports, subject to strict information disclosure and verification requirements. Carbon emissions allowances will be allocated based on a methodology and standards determined by the MEE.

Carbon emissions allowances will be recorded on a registration and settlement system, to be set up and operated by the MEE. This system will be used to record all information related to the holding, transfer, settlement, performance, and cancellation of national carbon emission rights, as well as for carbon emissions trading management and settlement.

Through the system, key emission units will be able to trade carbon emissions allowances and “other trading products” with financial institutions, other firms and individuals.

The draft rules specify fines up to CNY 30,000 that can be imposed for failures to actively produce emissions reports, providing false information, concealing information, or refusal to fulfill other obligations such as in relation to carbon allowance settlement.

The rules also provide for a mechanism for the use of emission reduction indicators to offset carbon emissions.

The rules, available here, are open for comment until 11 November.

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