China’s Ministry of Ecology and Environment (MEE) officially published a set of interim rules for carbon emission rights trading, governing registration, trading specification, and settlement of emission rights for the national emissions trading system (ETS) on May 17. Prior to trading, local governments should first identify their total emission reduction volumes and distribute the quota of emission rights to local enterprises and entities. The rules established market-oriented emission quota trading means, by which the minimum unit of change and unit price of declared trade volume are one ton of carbon dioxide equivalent and RMB0.01, respectively. In addition, before the national ETS registration and transaction institutions are established, Hubei Emission Exchange will take charge of registration, and Shanghai Environment and Energy Exchange (SEEE) will manage account opening, operation, and maintenance.

NDRC has been conducting pilot ETS programs in Beijing, Shanghai, Guangdong, and four other provinces since 2011. The pilot carbon trading products are mainly divided into local carbon emission quotas and Chinese Certified Emission Reduction (CCER). It is expected that MEE would open CCER registration for enterprises in the national ETS and oversee the trading volume dynamically. If carbon prices see abnormal fluctuations, the MEE regulatory agencies will intervene with built-in risk management mechanisms to protect against market volatility. According to TF Securities , based on the actual power generation capacity of wind power in China, if the development of the CCER market becomes stable, the annual revenue from wind power emission reduction is expected to reach RMB7.44bn.

After years of trial, MEE released an implementation plan on December 30, 2020 to roll out the nationwide ETS, first in the electricity sector involving 2,225 power generation companies across the country. The newest rules will further push forward the transition of regional ETS programs to the national level. In the meantime, the interim rules supplemented the first set laid out by the MEE in February, forming together the 1+3 framework for the national ETS. The national carbon market is expected to commence at the end of­­ June and serve as an important market mechanism for achieving China’s carbon neutrality goals. According to PBoC Governor Yi Gang, before 2030, China shall inject RMB2.2tr per year in carbon emission reduction.

Sources:

http://www.mee.gov.cn/xxgk2018/xxgk/xxgk01/202105/t20210519_833574.html

http://finance.sina.com.cn/tech/2021-01-10/doc-iiznctkf1308440.shtml

https://www.yicai.com/news/101055809.html

https://www.spglobal.com/platts/zh/products-services/energy-transition/global-integrated-energy-model