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China - Beijing pilot ETS

ETS Status
in force
Jurisdictions
Beijing
Start of operation (year)
2013
Sectoral coverage
Transport
Buildings
Industry
Power
Allocation
Free Allocation (Grandparenting; Output-based Benchmarking) and Auctioning
Offsets and credits
Domestic (national and provincial), with quantitative limits
Cap
~44 MtCO2 (2022)
GHGs covered
CO2 only
Average auction price
CNY 107 (USD 15)
Average secondary market price
CNY 102 (USD 14)
Total revenue since beginning
CNY 318.84 million (USD 43.3 million)
Total revenue
CNY 44.91 million (USD 6.24 million)

General Information

The Beijing Pilot ETS was launched in November 2013 and is one of three Chinese pilots with ETS regulation passed by its regional congress. Beijing applies a bottom-up approach to cap-setting. The ETS covers 30% of the city’s total emissions, including those from: heat, cement, petrochemicals, and other industrial enterprises; manufacturers; the service sector; and public transport. Covered entities must surrender allowances for all their covered emissions, and allocation is based on auctions or free allocation.

From 2013 to 2023, Beijing was the only regional pilot in China that used a price floor (CNY 20, USD 2.78) and ceiling (CNY 150, USD 20.84) as a price stability mechanism. In cases of consecutively high or low average prices, the government can auction or buy back extra allowances. The Beijing pilot has seen a relatively high carbon price level compared to the other ETS pilots in China. 

Beijing plays a supporting role in the national offset crediting program. The Beijing Green Exchange operates the China Certified Emissions Reduction (CCER) national exchange.

In March 2024, the People’s Government of Beijing Municipality updated the “Measures for the Management of Emissions Trading in Beijing”, which from May replaced the previous “Interim Measures for the Management of Emissions Trading in Beijing” issued in 2014. The new measures clarify the management responsibilities of the Beijing Municipal Ecology and Environment Bureau (Beijing EEB) and relevant departments in the Beijing pilot ETS, as well as the policy framework.

In May, the Beijing EEB, which manages the pilot, released a notice on the “Management of Key Carbon Emission Units and the Pilot Work of Carbon Emissions Trading in 2024”, which included several documents on MRV, allowance allocation, and offset credits. In this document, the Beijing EEB set the compliance deadline for 2023 emissions to November 15, 2024. 

In September, the Beijing EEB released a notice on the “Measures for the Administration of offset use in Beijing pilot”, which introduced new rules for offset credits use (See ‘Offset credits’ section).

In October, the Beijing EEB released a notice on the “Measures for the Administration of Auction and Repurchase of the allowance in Beijing pilot”, which introduced new market stability rules (See ‘Market Stability Provisions’ section).

Beijing organized two allowance auctions in September and November. The Beijing EEB auctioned 418.3 thousand allowances for a total of CNY 44.9 million (USD 6.24 million).

Transport
Buildings
Industry
Power

Emissions & Targets

 132.1 MtCO2e (2020)*


 

* No data is publicly available for recent years; the data here is estimated by local experts.

By 2025: At least 10% reduction in CO2 emissions (excluding passenger and cargo aviation) compared to the peaking level; reduce CO2 intensity by ~18% compared to 2020 levels (Beijing 14th Five-Year Plan on Environment Protection)

By 2030: Peak Beijing CO2 emissions (Beijing Carbon Peaking Plan)

By 2035: “Significant” reduction of CO2 emissions (Beijing 14th Five-Year Plan on Energy Saving and Climate Change)

Average auction price: CNY 107 (USD 15)

Average secondary market price: CNY 102 (USD 14)

Size & Phases

CO2 only

2013 and ongoing*

* In the short term, the existing Chinese regional carbon markets operate in parallel with the national Chinese carbon market. When the national ETS expands to new sectors, covered entities in these sectors will be integrated into the national ETS from the regional markets.

The cap under the Beijing Pilot ETS is the sum of the bottom-up installation level emissions of all individual covered entities. Caps over the past years have been as follows: 

2020: ~50 MtCO2 

2021: ~35 MtCO2*

2022: ~44 MtCO2**


 

* Lower than 2020 mainly due to transfer of the power sector to the national ETS.

** Higher than 2021 mainly due to 41 new covered entities in Beijing ETS.

Industrial and non-industrial companies and entities, including power grid operators, heating, cement, petrochemicals, other industrial enterprises, manufacturers, the service sector, public transport, and domestic aviation.* The power sector transferred to the national ETS in 2019; however, one entity remains covered by the Beijing pilot ETS for management reasons.

INCLUSION THRESHOLDS: 

Until 2015: 10,000 tCO2 per year, considering both direct and indirect emissions.

From 2016 onwards: 5,000 tCO2 per year, considering both direct and indirect emissions.

MANDATORY REPORTING: 2,000 tonnes of coal equivalent (tce) energy consumption per year


 

* Currently, the domestic aviation sector is only subject to mandatory reporting.

Point source (power and industry); downstream (indirect emissions from electricity and heat consumption).

882 entities within the pilot. In addition, 409 other entities had mandatory reporting but no surrender obligations for the 2024 compliance year.

Allowance Allocation & Revenue

Beijing carbon emission allowances (BEAs) are distributed for free, using benchmarking or grandparenting. For sectors using benchmarking or historical intensity methods, a pre-allocation method is adopted for the annual allowance allocation. Allocation is then adjusted ex-post to reflect the actual production in the respective compliance year.

FREE ALLOCATION: Free allocation through grandparenting based on historical emissions or emissions intensity in the baseline years (2016 to 2018).

Benchmarking is used for new entrants and entities with expanded capacity in the power sector, heat production, cement, and data centers (three new sectors with benchmarking from 2019). 

To prevent an excessive surplus or shortage of allowances, the Beijing EEB set upper limits for allowance surplus and shortage at 20% of the emissions for 2022 and 2023 compliance year. Covered entities with free allowance below 80% of their verified emissions will have their allocation adjusted upwards to 80% of their verified emissions. Covered entities with free allowances higher than 120% of their verified emissions will have their allocation adjusted downwards to 120% of their verified emissions.

AUCTIONING: Beijing may set aside up to 5% of allowances for irregular auctions (see ‘Market Stability Provisions’ section). 

CNY 318.84 million (USD 43.3 million) since beginning of program

CNY 44.91 million (USD 6.24 million) in 2024

Revenues are attributed to the city treasury.

Flexibility & Linking

Banking is allowed.

Borrowing is not allowed.

The use of offset credits is allowed. These are Chinese domestic, project-based offset credits (CCERs) and Beijing Certified Emission Reduction (BCERs). Eligible BCERs projects include green architecture, low-carbon transportation, landscaping, renewable energy and energy saving.

QUANTITATIVE LIMIT: The use of offset credits is limited to 5% of the annual emissions. 

QUALITATIVE LIMIT: CCERs issued under the old CCER scheme, which ran from 2012 to 2017, may still be used to offset emissions in the 2023 compliance period, but will no longer be valid starting in 2024 . No qualitative limits on new CCERs issued after January 2024 under the new CCER scheme.

Of the 5% limit, at least 50% must come from projects within the jurisdiction of the city of Beijing. Among non-Beijing CCERs, priority is given to those with regional climate or pollution control cooperation agreements (e.g., Hebei and Tianjin).

The Beijing Pilot ETS is not linked with any other system.

ETS: Chinese national ETS 

Domestic crediting mechanisms: Tan Pu Hui local offset credits in Beijing (BCER)

Domestic credit mechanism (national): China Certified Emissions Reduction (CCER) 

Compliance

One calendar year: the deadline to surrender allowances is set by Beijing EEB in the annual management notice.

MONITORING: Covered entities are required to set up monitor plans and monitor their emission based on these plans.

REPORTING: Annual 

VERIFICATION: Third-party verification is required. In addition, the government organizes expert review of all verification reports and some reports are subject to further fourth-party verification. 

FRAMEWORK: The Beijing EEB has general rules for monitoring and reporting, as well as for sector-specific guidelines for the following sectors: heat production and supply, thermal power generation, cement, petrochemicals, public transport, aviation, other industrial enterprises, and the service sector.

OTHER: In addition to covered entities under the ETS, all legal entities with energy consumption over 2,000 tce must report their emissions. Verification is not required.

Penalties for failing to submit emissions or verification reports on time can result in fines of up to CNY 50,000 (USD 6,947). Furthermore, companies failing to surrender enough allowances to match their emissions are fined up to five times the average market price over the previous six months for each missing allowance. 

Market Regulation

MARKET PARTICIPATION: Covered entities, domestic non-compliance entities, and domestic individuals that meet the requirements of the carbon emission trading rules set up by Beijing Green Exchange.

MARKET TYPES: 

Primary: BEAs are distributed through free allocation. Beijing set aside up to 5% of allowances for irregular auctions.

Secondary: Trading consists of five spot products: BEAs, CCERs, BCERs. The Beijing Green Exchange manages the trading of all three products. The Beijing ETS also allows over-the-counter trading.

Due to financial market regulations in China, no forward markets or derivatives are allowed.

LEGAL STATUS OF ALLOWANCES: Allowances are not considered financial instruments.

EXTRA ALLOWANCE AUCTIONS

Instrument type: Price-based instrument

Functioning: The Beijing EEB can auction extra allowances if the weighted average price of allowances exceeds 60% of the average transaction price in the previous calendar year for ten consecutive trading days, or when market liquidity is too low. It can also buy back allowances from the market using a special funding source from the municipal budget if the weighted average price of allowances is lower than 40% of the average transaction price of the previous calendar year for ten consecutive trading days.

EXCHANGE

Instrument type: Price-based instrument

Functioning: The Beijing Green Exchange implements a system of limits on price increases and decreases for listed trading over the exchange. This is 20% above or below the reference price (the weighted average price of all transactions on the previous trading day) to prevent large price fluctuations. It also sets the maximum position limit for the different market participants: the sum of their annual allocated allowances plus one million tonnes for compliance entities, one million tonnes for institutional investors, and 50,000 tonnes for natural persons.

Other Information

Beijing Municipal Commission of Development and Reform: Responsible for establishing the Beijing ETS until governmental restructure in 2019.

Beijing Ecology and Environment Bureau: Responsible for the Beijing ETS after governmental restructure in 2019.

Beijing Green Exchange (previously known as the Beijing Environment Exchange): Responsible for the trading platform.

Beijing Climate Change Management Center: Responsible for the registry.

No public information is available on system’s evaluation or review. However, the local carbon exchange has published annual reports with an overview of the system’s performance from 2014 to 2018. In addition, research on improving legislation, MRV, and benchmarking, among other issues, has been funded by the local government. 

Beijing Municipal People’s Congress ETS Pilot Bill (2013)

Measures for the Management of Emissions Trading in Beijing (2024)

Beijing Local MRV Standards for Eight Industries (power generation, cement, petrochemical, heat production, service, road transportation, aviation and other industries) (2021)

Beijing EEB Notice on the Management of Key Carbon Emission Entities and the Pilot Work of Carbon Emission Trading in 2024

Measures for the Administration of offset use in Beijing ETS (2024)

Measures for the Administration of Auction and Repurchase of the allowance in Beijing ETS (2024)

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