China’s New Carbon Emissions Trading SystemAug 18th, 2013 | By Douglas McLachlin / JH Ding | Category: Climate Change, Featured Articles
Carbon emissions trading will start in China at pilot sites in July 2013 for major emitters of greenhouse gases (GHGs), and organizations in other industries should prepare for a national emissions trading system that could start as early as 2015.
As part of China’s efforts to meet their global commitment to reduce carbon intensity (per-unit gross domestic product carbon emissions) in 2020 by 40% to 45% compared to 2005 levels, the National Development and Reform Commission (NDRC) created seven regional pilot carbon emissions trading schemes (ETS) in 2011. The regions are
As of May 2013, most pilot ETS have released detailed implementation plans, and Shanghai, Guangdong, and Shenzhen have published lists of companies that are required to participate in the ETS.
Mechanics of ETS in China
Companies participating in the ETS will be allocated free emissions permits, and they will have to report their emissions on an annual basis. If their emissions exceed the quota, they will need to buy emissions permits through the emissions trading system. In the future, a certain proportion of carbon allowances might be distributed through an auction in some pilot regions.
In June 2013, the first two of China’s emissions trading pilots are expected to formally begin trading in Shenzhen and Shanghai. Sometime between 2015 and 2020, the NDRC is expected to replace the regional ETS pilots with a national emissions trading system that will require large energy consumers to report the carbon emissions for all of their operations in China.
Who is Affected?
Some pilot ETS including Shanghai, Guangdong, and Shenzhen, have published lists of organizations that are required to participate in carbon trading, while some of the other regions have clarified the coverage of ETS. In some pilot regions, organizations with lower carbon emissions are required to report their annual emissions during the 12th Five-Year Plan, and it is expected that they will be required to participate in emissions trading after 2015.
Preparing for the Future
Organizations that have not yet been directed to participate in a regional ETS should evaluate their energy and GHG management programs to prepare for the forthcoming national emission trading system after 2015. Target organizations include
- Large industrial energy users that consume more than 5,000 tonnes of standard coal per year
- Large GHG emitters in the semiconductor, chemicals, and similar industries
- Large public or commercial buildings and chain stores
- Organizations that are required by the government to report energy and GHG data
Companies should seek to understand their energy and GHG inventories, identify measures to reduce energy consumption and GHG emissions, and maximize the benefits of participating in the ETS.
A summary of covered facilities in each of the seven ETS regions is provided below.
Beijing – Not revealed.
Tianjin – Companies with annual emissions that exceed 20,000 tonnes of CO2eq since 2009 in key industries including iron and steel, petrochemicals, chemicals, power, heating, oil and gas, and civil buildings.
Shanghai – Companies that emitted more than 20,000 tonnes of CO2eq in 2010 or 2011 in key industries including iron and steel, petrochemicals, chemicals, power, nonferrous metals, building materials, textiles, pulp and paper, rubber, chemical fibers, etc. Also, non-industrial emitters of more than 10,000 tonnes of CO2eq in 2010 or 2011 in key sectors including aviation, ports, airports, railways, commercial buildings, hotels, and financial institutions.
Chongqing – Not revealed.
Hubei – Companies that consumed annually more than 60,000 tonnes of standard coal in 2010 or 2011.
Guangdong – Companies with annual emissions that exceed 20,000 tonnes of CO2eq or energy consumption of more than 10,000 tonnes of standard coal in any year from 2011 to 2014 in 9 industries (power, iron and steel, cement, ceramics, petrochemicals, textiles, nonferrous metals, plastics, pulp and paper).
Shenzhen – Companies with annual emissions that exceeded 20,000 tonnes of CO2eq during the period 2009 to 2011, and civil buildings with annual emissions of more than 5,000 tonnes of CO2.
About the Authors
Douglas McLachlin is the Air Quality and Climate Change Partner, Canada Division for Environmental Resources Management (ERM), a global environmental consultancy with four offices in China. He was formerly ERM’s Asia Pacific Region Air Quality and Climate Change Practice Leader. Mr. McLachlin has more than 25 years of experience in environmental assessment and project management. He has provided strategic advice and services to the private and public sectors including carbon foot printing, energy efficiency, renewable energy, integrated water management, green building certification, and waste management planning.
JH Ding is a Senior Consultant in ERM’s Shanghai, China office. Mr. Ding studied green building and building energy efficiency at Xi’an Jiaotong University and Tsinghua University for seven years. Mr. Ding has eight years of experience in green building design, consulting, modeling, commissioning, measurement and verification, and certification for many buildings including several Shanghai 2010 Expo venues and the Shanghai Centre Plaza. He has been responsible for the energy and water auditing of more than 300 public buildings in Shanghai and has extensive experience in building energy efficiency management and optimization.
ERM’s Management and Planning of Energy & GHG services practice helps companies that have energy and GHG pressure understand their energy and GHG inventories, identify measures to reduce energy consumption and GHG emissions, and maximize benefits from participating in the ETS. These services typically include modules that are flexible for companies to adopt:
• Policy regulation review
• Energy and GHG inventory review
• Improvement options of energy efficiency and GHG emission reduction
• Economic assessment of improvement options and emission trading strategy
• Management system expansion, energy & GHG forecast and target setting
Photograph: Shanghai by Bhavit Naik, Margao, Gao, India.