China
Important Dates
Market-based Approach
The PMR will provide support to China to develop a nation-wide emissions trading (ETS) system. The target launch date is between 2018 and 2020. Specifically, PMR suport wil be used to develop the following core ETS components:
- Determine scope of the system;
- Set a cap on emissions;
- Establish a system for allocating allowances;
- Develop an MRV system and a transaction registry;
- Establish compliance rules;
- Develop a price containment mechanism;
- Establish an offset mechanism and rules for linking;
- Develop a legal framework;
- Identify participants and trading products; and
- Define a system for market oversight.
To support the development of the national ETS, two studies are planned:
1. Role of State-owned Enterprises (SOE) in the National ETS: Recognizing the influence of China’s SOEs on economic growth and their significant contribution to carbon emissions (reining in emissions from SOEs is critical to achieving the national mitigation target), China aims to include SOEs in the national ETS. This study will explore the unique characteristics of SOEs relative to other modern enterprises, identify challenges to inclusion of SOEs in the 7 pilot ETS, and propose steps for inclusion of SOEs in the national ETS. Specifically, the study will report on the following:
- Characteristics of and incentives for SOEs;
- Coverage and scope for SOEs;
- Allowance allocation for SOEs; and
- MRV System for Effective Involvement of SOEs in China ETS.
2. Participation of the Power Sector in the National ETS: Like China’s SOEs, the power sector is also an important contributor to carbon emissions. This study will identify a pathway toward inclusion of the sector in the national ETS, including determining the following:
- Coverage;
- Cap setting;
- Allocation;
- MRV; and
- Coordination of pricing and dispatching mechanism.
National Context
Mitigation Target
China’s climate change strategy is integrated into its social and economic development planning, a point underscored in the June 2015 publication of its Intended Nationally Determined Contribution (INDC) to the UNFCC.
“Looking into the future, China has defined as its strategic goals to complete the construction of a moderately prosperous society in an all-round way by 2020 and to create a prosperous, strong, democratic, culturally developed and harmonious modern socialist country by the middle of this century. It has identified transforming the economic development pattern, constructing ecological civilization and holding to a green, low-carbon and recycled development path as its policy orientation.” (INDC of China, pg. 2. Unofficial English translation)
Action on climate change mitigation will be an important catalyst for the restructuring of key aspects of the Chinese economy, including the power sector. China’s annual GHG emissions in 2008 were estimated as 7,031 million tonnes, while per capita CO2 emissions from fossil fuel combustion in China were 5.13 tons in 2009, equivalent to 52% of the average level in OECD countries. China has pledged to reduce its CO2 emissions per unit of GDP by 40–45% by 2020, compared with 2005 levels and has also pledged to increase non-fossil-based primary energy consumption to 15% by 2020.
The National Development and Reform Commission (NDRC) is responsible for climate change policy design and implementation, with division of responsibilities among relevant ministries based on sectors and provincial bodies. Policies have been designed based on China’s National Climate Change Program and the 12th Five Year Plan. The 2009 Resolution of the Standing Committee of the National People’s Congress to develop responses to climate change requires the alignment of climate change related laws with the government’s working plan.
Emissions Trading
China has adopted emissions trading as one tool to achieve its mitigation target. The Chinese government is piloting emissions trading in five provinces and two cities, accounting for 18% of China’s population and 28% of its national GDP. All seven pilots were launched between 2013 and 2014. They include: Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen.
Focal Point
The Ministry of Energy coordinates GHG mitigation policies and is the focal point for PMR. The PMR Steering Committee was established in March 2012 and formed by the ministries of Foreign Affairs, Finance, Economy, Agriculture, Mining, Transport & Telecommunications, Energy and Environment.