China releases regulation on national ETS

The National Development and Reform Commission (NDRC) released the Interim Management Plan for Emissions Trading Scheme (“the Plan” for short) last Wednesday, setting out frameworks regarding the emission quota management and quota trading together with some other aspects like the national emission trading scheme (ETS).

The Plan explicitly stated the quota reserve mechanism of the national ETS, for the purpose of auction, market adjustment and major new entrant projects. In addition, the allocation mechanism of emission quota will be made by NDRC. It also said local governments can only execute the standard introduced by NDRC or set more stringent regional provision, in terms of sector coverage and free quota allocation.

The Plan confirmed the possibility of individuals participating in the trading activities, while stating that the national ETS will only trade the national standardised emission quota and China Certified Emission Reduction (CCER) in the early stage. However, the possibility of introducing carbon derivatives was reserved.

On the other hand, the Plan did not set the limit of carbon offsetting with CCER. Although the Plan stated administrative punishment would be applied to punish compliance entities and delinquent verification agencies, the punishment would be drawn by the provincial government, which remains the penalty in flux. Kun Yang