Compare ETS
Use this function to compare the design elements and characteristics of up to three ETSs from around the world.
Switzerland Emissions Trading System
* In principle, all these gases are covered in accordance with the CO2 Ordinance. In practice, only CO2, N2O, and PFCs require monitoring, as the share of the other gases is negligible.
General Information
The Switzerland (Swiss) ETS started in 2008 with a five-year voluntary phase. Thereafter, participation was mandatory for large, energy-intensive entities and voluntary for medium-sized entities. The Swiss ETS covered about 12% of the country’s total GHG emissions in 2022 (including aviation). Participants in the ETS are exempt from the national CO2 levy.
The Swiss ETS covers electricity generation, industrial entities (largely comprising companies from the cement, chemicals, pharmaceuticals, paper, refining, and steel sectors), domestic aviation, and flights to the European Economic Area and the United Kingdom. Allowances are allocated through benchmarking and auctioning. Auctioning volumes may be reduced if the total number of allowances in circulation exceeds a certain threshold.
The Swiss ETS has been linked with the EU ETS since January 2020. In January 2025, Switzerland implemented reforms to align its ETS with the 2023 EU ETS revisions, adopting the same linear reduction factors and phasing out free allocation for aviation to ensure continued compatibility between the two systems. The same benchmarks as in the EU ETS apply to stationary entities covered by the Swiss ETS.
The system is mandated by the Federal Act on the Reduction of CO2 Emissions (“CO2 Act”) and regulated through an implementing regulation (“CO2 Ordinance”).
On January 1, 2025, the revised CO2 Act entered into force, aligning the Swiss ETS with the revised EU ETS 1.
For stationary installations and aviation, the same linear reduction factors as in the EU ETS now apply to reduce the respective caps for 2024 to 2030: 4.3% for 2024 to 2027 and 4.4% for 2028 to 2030. Additionally, carbon capture and storage, and under certain conditions foreign biogas use, can now be accounted for in the ETS. In aviation, free emission allowances for operators are phased out by 2026, in accordance with the rules in the EU ETS.
In November, the Swiss Federal Council adopted further partial revisions to the CO2 Ordinance, effective January 1, 2026, including further reductions in free emission allowances for industrial installations and a new incentive mechanism providing free emission allowances to aircraft operators to partially offset costs for sustainable aviation fuel (SAF) uptake.
Emissions & Targets
40.8 MtCO2e (2023)
By 2030: At least 50% reduction from 1990 GHG levels, to be implemented as an emission
budget covering 2021 to 2030 (updated first NDC and revised CO2 Act)
By 2035: At least 65% reduction from 1990 GHG levels, to be implemented as an emission budget covering 2031 to 2035 (NDC 2.0)
By 2040: At least 75% reduction from 1990 GHG levels (“Climate and Innovation Act”)
By 2050: Net zero GHG emissions (NDC and “Climate and Innovation Act”)
EUR 74.18 (USD 83.82) (average auction price in 2025)
Size & Phases
* In principle, all these gases are covered in accordance with the CO2 Ordinance. In practice, only CO2, N2O, and PFCs require monitoring, as the share of the other gases is negligible.
VOLUNTARY PHASE: Five years (2008 to 2012)
SECOND TRADING PERIOD: Eight years (2013 to 2020)
THIRD TRADING PERIOD: Ten years (2021 to 2030)
An absolute cap limits the total emissions allowed in the system and is fixed ex-ante.
VOLUNTARY PHASE: Each participant received its own entity-specific reduction target.
SECOND TRADING PERIOD:
Stationary installations: Overall top-down cap of 5.6 MtCO2e (2013) that was reduced annually by a constant linear reduction factor of 1.74% (of baseline emissions set by entities’ historical data from 2008 to 2012) to 4.9 MtCO2e in 2020.
Aviation: 1.3 MtCO2 (2020)
THIRD TRADING PERIOD: An annual linear reduction factor of 2.2% (2010 base year) applied to the cap for stationary installations and to the aviation cap from 2021 to 2023. As from 2024, the effective linear reduction factor is 4.3%, and 4.4% from 2028.
MANDATORY PARTICIPATION: Industries listed under Annex 6 of the CO2 Ordinance must participate in the Swiss ETS. These include 25 categories, such as cement, chemicals and pharmaceuticals, refineries, paper, district heating, steel, and other sectors. Since 2020, the ETS has covered emissions from aviation (domestic and outbound flights to the EEA or the UK) and fossil-thermal power plants.
INCLUSION THRESHOLDS: Threshold values apply to most activities in terms of production capacity or total rated thermal input.
POSSIBLE VOLUNTARY OPT-IN: Industries with a total rated thermal input of ≥10 MW. A company that fulfils the participation conditions must submit the application within the following six months.
POSSIBLE OPT-OUT: Industries with a total rated thermal input greater than 20 MW but emissions below 25,000 tCO2e in each of the past three years. If an entity’s future emissions rise above the threshold in a given year, it must participate in the ETS starting from the following year and cannot opt out for the remainder of the compliance period. New entrants can apply for an opt-out with immediate effect if they can credibly report their emissions to be below 25,000 tCO2e/year.
AVIATION: Commercial aircraft operators emitting more than 10,000 tCO2/year or operating ≥ 243 flights in a four-month period in the preceding year. Non-commercial operators are included when emitting more than 1,000 tCO2/year. The thresholds do not apply if the operator has obligations under the EU ETS.
Point source
Stationary installations: 98 (2024)
Aircraft operators: 193 (2024)
Allowance Allocation & Revenue
VOLUNTARY PHASE: Participants received free allowances covering emissions up to their entity-specific emissions target.
SECOND TRADING PERIOD:
Free allocation: Free allocation was based on industry benchmarks. Free allocations for sectors not exposed to the risk of carbon leakage were phased out gradually. In 2013, these entities received 80% of their allowances for free, which was reduced to 30% by 2020.
A correction factor was implemented to reduce the allocated emissions allowances, determined by industry benchmarks and ensuring they aligned with the specified overall emissions cap.
Free allocation for aircraft operators was based on tonne-kilometer data for 2018 reported by individual aircraft operators, multiplied by the benchmark of 0.642 emissions allowances per 1,000 tonne-kilometers (same benchmark as in the EU ETS).
Auctioning: Allowances that were not allocated for free were auctioned. Auctions took place two or three times a year, depending on available auction volumes. Since January 2020, auctions are open to entities covered by the Swiss ETS and the EU ETS, as well as to non-compliance entities allowed to place bids in the EU ETS. In line with EU ETS legislation, FOEN has the authority to cancel the auction if the clearing price is significantly below the prevailing secondary market price of the EU ETS. In such a situation, Swiss Emissions Allowances (CHUs) are transferred to subsequent auctions.
5% of the allowances are set aside in a reserve for new entrants and fast-growing operators.
Aviation: In line with EU ETS regulations, starting in 2020, 15% of aviation sector allowances are auctioned. 3% were placed in the reserve dedicated to new and fast-growing operators. The remaining 82% was allocated according to sector-specific benchmarks
THIRD TRADING PERIOD:
Free allocation: As of 2022, the Swiss ETS applies the same allocation benchmarks as the EU ETS. Free allocation levels may be updated annually if production levels deviate at least 15 percentage points from the 2014 to 2018 base years. Free allocation in the aviation sector will be phased out by 2026, in line with the EU ETS regulation. From 2026, a new incentive mechanism provides free emission allowances to aircraft operators to partially offset costs for SAF uplift. From 2026, further reductions in free emission allowances for industrial facilities were implemented to maintain alignment with EU ETS reforms.
Auctioning: Since 2022, auction volumes have been subject to a market stability mechanism (see ‘Market Stability Provisions’ section).
EUR 258 million (USD 373.5 million) since the beginning of the program
EUR 77 million (USD 87.1 million) in 2025
From 2025, revenues from Swiss ETS auctions are earmarked to support inter alia the decarbonization of installations in the ETS and the mitigation of emissions from aviation.
Flexibility & Linking
Banking within and across phases is allowed without limits. Banked allowances from Phase 3 of the EU ETS can be used for compliance in the 2021 to 2030 trading phase.
Borrowing across phases is not allowed. Within a phase, allocated allowances from the current trading year may be used for surrender obligations of the prior year.
The use of offset credits is not allowed.
QUALITATIVE LIMITS: Since 2021, offset credits cannot be used to meet compliance obligations. International offset credits were allowed up to 2020, subject to certain criteria. Most categories of credits from CDM projects in least developed countries were allowed. Credits from CDM and Joint Implementation projects from other countries were eligible only if registered and implemented before the end of 2012.
QUANTITATIVE LIMITS: During 2013 to 2020, the maximum amount of offset credits allowed into the system was set at 11% of average emissions allowances allocated in the voluntary phase, minus offset credits used in that same time period, multiplied by five.
Industries that entered the Swiss ETS in the second trading period could surrender offsets to cover up to 4.5% of their emissions. For aircraft operators, the quantitative limit was set at 1.5%.
Switzerland concluded negotiations with the EU on linking their respective systems in 2015 and signed the agreement in 2017. Following legislative approval and ratification in 2019, the link entered into force in January 2020. Prior to that, revisions were made to align with the EU ETS legislative framework.
Covered entities in the Swiss ETS can use EU Allowances (EUAs) for compliance, and vice versa. The two systems run separate auctions. Market participants from the EEA need an account in the Swiss Emissions Trading Registry in order to participate. From 2024, allowance transfers between the EU and Swiss registries are executed on a daily basis (Monday to Friday), with specific exceptions for certain dates. Exception dates are published in the Emissions Trading Registry.
Carbon tax: CO₂ levy
Compliance
One calendar year. Covered entities have until the end of September of the following year to surrender allowances.
FRAMEWORK: The MRV system is mandated by the CO2 Act and regulated through the CO2 Ordinance.
MONITORING: Monitoring plans are required for every installation and for every aircraft operator (no later than three months after the registration deadline). Monitoring plans must be approved by a competent authority. Emissions according to the Swiss CO2 Ordinance (mainly CO2 and N2O) are subject to monitoring.
REPORTING: Annual monitoring report, based on self-reported information to be submitted by the end of March of the year following the compliance period.
VERIFICATION: FOEN may order third-party verification of the monitoring reports from installations and can take random samples to ensure consistency. Aircraft operators must have their monitoring reports verified by an accredited third-party verifier.
The penalty for failing to surrender sufficient allowances is set at CHF 125/tCO2 (USD 150.36/ tCO2). In addition to the fine, entities must surrender the missing allowances in the following year.
Market Regulation
MARKET PARTICIPATION: Compliance entities, non-compliance entities (domestic and international) and individuals. Traders are subject to a holding limit of one million Swiss/EU allowances.
MARKET TYPES:
Primary: Single round sealed-bid uniform price auction, organized by the Swiss Emissions Trading Registry several times per year.
Secondary: CHUs are not traded on regulated trading platforms but may be traded over the counter. EUAs, which can be used for compliance in the Swiss ETS, are traded on multiple exchanges, including ICE Futures and EEX.
LEGAL STATUS OF ALLOWANCES:
Allowances do not qualify as financial instruments under Swiss financial market regulations. Emissions allowances may form the underlying asset of derivative contracts which are covered by the “Financial Market Infrastructure Act”.
Market stabilisation mechanism
Instrument type: Quantity-based instrument
Functioning: The authorities introduced a mechanism in 2022 that reduces auction volumes if the quantity of emissions allowances in circulation exceeds a certain threshold.
If the number of allowances in circulation exceeds 50% of the cap of the previous year, the market stabilization mechanism reduces the auction volume of the current year by 50%. In 2022, the mechanism reduced the auction volume from 460,000 to 230,000 and in 2023 from 580,000 to 290,000 allowances. In 2024, it reduced the auction volume from 820,000 to 410,000 allowances. In 2025, the mechanism halved the auction volume from about 700,000 to 350,000 allowances.
The unauctioned allowances lose their validity after the end of the compliance period. The mechanism is regularly reviewed against market dynamics and developments in the EU. The Swiss ETS is not subject to the EU ETS Market Stability Reserve.
Other Information
Federal Office for the Environment (FOEN): Implementing authority, e.g., responsible for the registry, for auctioning allowances, receiving emission reports and enforcing compliance.
A revision of the CO2 Act that covers the period from 2025 to 2030 was adopted by the Swiss Parliament in March 2024 and entered into force in January 2025. The new law provides for a linking-compatible revision of the Swiss ETS.
In July 2025, FOEN published an external evaluation of the Swiss ETS. Reviewing the period from 2013 to 2023, it found that the Swiss ETS had little impact on emission reductions.[1]
[1] INFRAS (2025): Evaluation of the Swiss Emissions Trading System (ETS). Part A: Evaluation Report. Commissioned by the Federal Office for the Environment (FOEN)
Federal Act on the Reduction of CO2 Emissions (CO2 Act)
Ordinance on the Reduction of CO2 Emissions (CO2 Ordinance)
China National ETS
CF4 and C2F6 (only for aluminum smelter sector)
General Information
China’s National Carbon Market began operating in 2021, with the objective of contributing to the effective control and gradual reduction of CO2 emissions. China’s National Carbon Market is the world’s largest in terms of covered emissions, estimated to cover around 8 billion tCO2 – or more than 60% of the country’s CO2 emissions.
The China National Carbon Market regulates more than 3,300 companies from the power, steel, cement, and aluminum smelter sectors with annual emissions in excess of 26,000 tCO2e. Covered entities must surrender allowances for all their covered emissions. The allowances in the China National Carbon Market are 100% freely allocated using an output-based approach. Compliance obligations are currently limited and vary between different types of facilities. The system’s coverage will expand to other sectors over time.
In January 2024, China relaunched its national GHG voluntary emission reduction trading market, the Chinese Certified Emissions Reduction scheme (CCER). This came after six years of suspension, during which time it was reformed. This could contribute to the implementation of an offsetting scheme in the domestic ETS (see ‘Offset Credits’ section).
The National Carbon Market builds on the successful experience of regional carbon markets implemented in eight regions. These pilots continue to operate in parallel with the National Carbon Market, covering sectors and entities not included in the national system.
In December 2024, 99.98% of the covered entities in the National Carbon Market surrendered their compliance units for the 2023 compliance year.
In August 2025, China’s highest authorities – the General Office of the CPC Central Committee and the General Office of the State Council – issued the “Opinions on Advancing Green and Low-Carbon Transformation and Strengthening the Development of the National Carbon Market”. This policy sets out a roadmap for transitioning from an intensity-based cap to an absolute cap and expanding the National Carbon Market’s coverage.
In November, the Ministry of Ecology and Environment (MEE) published the allocation plan for the steel, cement, and aluminum smelter sectors for 2024 and 2025. According to the plan, all covered entities in these three sectors will receive free allowances equivalent to their verified emissions in the 2024 compliance year. In 2025, free allocation will be based on a more differentiated, performance-based approach (See ‘Allowance Allocation’ section).
In November, China submitted its 2035 NDC, committing to reduce economy-wide GHG emissions by 7-10 % from peak levels by 2035. It is the first time China has committed to reducing its absolute GHG emissions. The new NDC also aims to establish a more effective and dynamic National Carbon Market. It envisages expanding the coverage and introducing auctions in the National Carbon Market.
Emissions & Targets
14,314 MtCO2e (2021)
Before 2030: Peak CO2 emissions; reduction of CO2 emissions per unit of GDP by over 65% from 2005 levels (“‘1+N’ policy framework”; NDC 2.0)
By 2035: Reduce economy-wide GHG emissions by 7-10 % from peak levels (NDC 3.0)
Before 2060: Carbon neutrality (‘1+N’ policy framework; NDC 2.0)
Average secondary market price (2025): CNY 70.78 (USD 9.85)
Size & Phases
CF4 and C2F6 (only for aluminum smelter sector)
There are currently no specific phases for the Chinese national ETS.
The cap is the sum of the bottom-up total allowance allocation to all individual covered entities. It is adjusted according to the actual production levels.
The National Carbon Market is estimated to have had an annual cap of ~4,500 MtCO2 in 2019 and 2020, ~5,100 MtCO2 in 2021 and 2022, ~5,200 MtCO2 in 2023 and ~8,000 MtCO2 in 2024.
Power (including combined heat and power, as well as captive power plants of other sectors), steel, cement, and aluminium smelter.
Compliance obligations are currently limited (see ‘Allowance Allocation’ section).
The scope is expected to be gradually expanded to cover other sectors: petrochemicals, chemicals, flat glass, copper smelter, paper, and aviation. Entities in these sectors have MRV obligation since 2015.
INCLUSION THRESHOLDS:
For 2019 to 2020: Entities with annual emissions of 26,000 tCO2 or greater in any year from 2013 to 2019.
For 2021 to 2022: Entities with annual emissions of 26,000 tCO2 or more in any year from 2020 to 2021.
From 2023: Entities with annual emissions of 26,000 tCO2 or more in the previous year.
Point source
~3,300 (2024)
Allowance Allocation & Revenue
Allowances are distributed for free, using output-based benchmarking or output-based intensity method. The competent authorities update the allocation plans every year and the following information refers to the latest allocation plans.
FREE ALLOCATION (Power sector): Output-based benchmarking is used as the main allocation method, with four distinct benchmarks: conventional coal plants below 300 MW; conventional coal plants above 300 MW; unconventional coal; and natural gas.
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.
Entities received allowances at 70% of their verified emissions in the previous year. Allocation was subsequently adjusted to reflect actual generation in 2023 and 2024. A unit load (output) adjustment factor distributed more allowances for coal-fired entities operating at load rates below 65%.
According to the 2023 to 2024 allocation plan, compliance obligations are limited. Gas-fired plants only need to surrender allowances up to their level of free allocation as per the benchmarks. Coal-fired plants with free allowance below 80% of their verified emissions will have their allocation adjusted upwards to 80% of their verified emissions. This means that 20% remains the maximum shortfall, similar to the previous compliance periods.
FREE ALLOCATION (Steel, cement, and aluminum smelter sector): For the 2024 compliance year, covered entities will receive free allowances equal to their verified emissions.
For the 2025 compliance year, the allocation method is intensity-based, designed to encourage efficiency improvements without immediately limiting overall emissions output or resulting in very large surpluses or shortages of allowances. For covered entities whose emissions intensity falls within 20% above or below the sectoral balance value, their allocation equals their verified emissions multiplied by one minus 15% of their deviation. For covered entities/facilities with deviations exceeding 20% in either direction, the adjustment is capped at 3% of verified emissions.
Production of certain products in the cement sector will receive annual allowances equal to their verified actual carbon emissions.
No pre-allocation for the 2024 compliance year took place. For the 2025 compliance year, entities received pre-allocation at 70% of their 2024 verified emissions. The final allocation was subsequently adjusted after the verification of emissions in 2025 to reflect actual output.
AUCTIONING: Allocation currently takes place through free allocation, but the Interim Regulations clarify that auctioning is to be introduced and gradually expanded. There is currently no timeline for this.
There is currently no arrangement for the use of revenues generated by the scheme.
Flexibility & Linking
Borrowing was temporarily allowed in 2021 and 2022.
Banking was allowed with no limit in the first three compliance periods. Since 2024, covered entities in power sector are allowed to bank up to 10,000 tonnes plus 1.5 times their net sales over the period from 2019 to 2024. Covered entities in the steel, cement, and aluminum smelter sectors are allowed to bank up to 100,000 tonnes plus 1.5 times their net sales over the period from 2019 to 2024.
The use of offset credits is allowed.
QUANTITATIVE LIMITS: Covered entities can use CCERs generated from projects not covered by the National Carbon Market for up to 5% of their verified emissions.
QUALITATIVE LIMITS: There were no additional project or vintage restrictions.
In 2012, the National Development and Reform Commission (NDRC) issued the “Interim Measures for the Management of Voluntary GHG Emissions Reduction Transactions”, which provided guidelines for the issuance of CCERs. The registration of CCER projects started in 2015, but the program was suspended in 2017 while regulations were reviewed. MEE launched the CCER system in 2024 with new methodologies, registry, verifiers, and exchange.
Only credits from projects registered in the new CCER program are eligible for offset use in China’s National Carbon Market after January 2025.
The National Center for Climate Change Strategy and International Cooperation (NCSC) operates the CCER registry. The Beijing Green Exchange is dedicated to CCER trading platforms.
The China national ETS is not linked with any other system.
ETS: Regional ETSs in Beijing, Chongqing, Fujian, Hubei, Guangdong, Shanghai, Shenzhen, and Tianjin
Domestic crediting mechanism (national): CCER
Domestic crediting mechanisms: Local offset crediting mechanism in Beijing, Chongqing, Fujian, Hubei, Guangdong, Shanghai, Shenzhen, and Tianjin
Compliance
Two calendar years from 2019 to 2022. One calendar year from 2023 onwards.
MEE publishes an ETS work plan to set the timeline for MRV work each year. MEE published the 2025 work plan in April 2025.
FRAMEWORK: MRV guidelines, supplementary data sheets, verification guidelines, and other guidance are available for the eight sub-sectors to be covered by the ETS. This MRV framework has evolved continuously since 2013 (see ‘Sectors and Thresholds’ section).
MONITORING: Covered entities are required to set up and follow monitor plans.
REPORTING: Covered entities must submit a monthly emissions report within 40 calendar days after the end of each month, including fuel consumption, low-level calorific value, carbon content of the fuel, and purchased electricity, output products, as well as other parameters. Covered entities must submit the annual emissions reports by the end of March next year.
VERIFICATION: Provincial-level ecological and environmental authorities are responsible for organizing the verification of GHG reports. They may commission technical service agencies to provide verification services. Verification of 2024 emissions from the power sector must be completed by the end of June 2025. Verification of the 2024 emissions from the cement, aluminum smelter and steel sectors should be completed before the end of August 2025. Verification of other key industries should be completed by the end of September 2025.
The Interim Regulations enhanced enforcement measures and penalties for different parties. Covered entities face a fine for not reporting or cheating in reporting, ranging from CNY 500,000 (USD 69,542) to ten times the illegal gains. Failures in compliance obligations result in fines ranging from five to ten times the market value of the gap, a significant increase from the previous maximum fine of CNY 30,000 (USD 4,173). For those who refuse to surrender allowances after receiving a warning, deductions from the following year’s allocation and potential production suspension are now in force.
Consultancy firms, third-party verifiers, and testing organizations involved in MRV data fraud may face penalties up to ten times the value of their illegal gains, as well as disqualification. Similar punishments also apply for market manipulation. The regulation rectifies the previous absence of penalties for misconduct by technical service providers and market participants.
Market participants involved in market manipulation behaviors may face penalties up to ten times their illegal gains, starting from CNY 500,000 (USD 69,542).
Market Regulation
MARKET PARTICIPATION: Compliance entities. The Interim Regulations indicate that other types of institutions or individuals may in the future also be allowed to participate in the market; however, there is no specific timeline for this.
MARKET TYPES:
Primary: Allowances are currently only distributed by free allocation. The Interim Regulations state the intention to introduce auctioning, though without a specific timeline.
Secondary: China Emission Allowances (CEA) can be traded on a dedicated trading platform managed by the Shanghai Environment and Energy Exchange. CEAs for the 2019 to 2020 period, CEAs for 2021, CEAs for 2022, and CEAs for 2023 are categorized as four different products on the exchange, and have similar prices.
Due to financial market regulations, other products (i.e., derivatives) are currently not allowed.
LEGAL STATUS OF ALLOWANCES: Allowances are not considered financial instruments. For financial accounting purposes, the Ministry of Finance published an interim policy that categorizes only purchased allowances, and not those received for free, as assets in financial statements.
In May 2021, the MEE announced the option of establishing a market-regulating and protection mechanism. This would enable the MEE to respond to abnormal fluctuations in trading prices, for instance through buy-back, auctioning, or adjusting the rules related to CCER use. The necessary triggers and specifics of this mechanism are yet to be defined.
EXCHANGE
Instrument type: Price-based instrument
Functioning: The Shanghai Environment and Energy Exchange implements a system of limits on price increases and decreases for trading over the exchange. For listed trading (the maximum volume for a single transaction does not exceed 100,000 tCO2e), this is 10% above or below the reference price (the closing price of the previous trading day). For block trading (minimum transaction volume of 100,000 tCO2e), this is 30% above or below the reference price. Only transactions within this price range can be successfully completed on the exchange. It also sets the maximum position limit for the different market participants: the sum of their annual allocated allowances plus 1 MtCO2 for compliance entities, 1 MtCO2 for institutional investors, and 50,000 tCO2 for natural persons.
Other Information
The China National Carbon Market has a multi-level governance structure involving three levels of government:
Ministry of Ecology and Environment (MEE): Acts as the national competent authority setting the rules and overseeing the system, jointly with other national regulators.
Provincial-level MEE subsidiaries: Oversee the implementation of the ETS, including identifying covered entities, organizing MRV, hiring verifiers, calculating allowance, managing provincial registry account, and oversee compliance.
Municipal-level authorities: Responsible for managing covered entities directly.
China Carbon Emissions Registration and Clearing Co., Ltd.: Responsible for operating the CEA registry and clearing platform.
Shanghai Environment and Energy Exchange: Operates the CEA trading platform.
National Center for Climate Change Strategy and International Cooperation (NCSC):
Operates the CCER registry.
The Beijing Green Exchange: Responsible for operating the CCER trading and clearing platform.
An evaluation framework is currently under development. The MEE has published annual ETS progress reports since 2024. According to the 2025 progress report, the carbon intensity in fossil-fuel power generation in 2024 decreased 10.8%, compared to the 2018 level.
The National Measures for the Administration of Carbon Emission Trading (trial) (2021)
Allocation Plan for the Power Sector (2023-2024)
Management Measures for voluntary Greenhouse Gas Emission Reduction Trading (Trial) (2023)
Updated Guidelines for GHG Monitoring and Reporting for the power sector (2023)
Updated Guidelines for GHG Monitoring and Reporting for industrial sectors (2023)
Interim Regulations on the Administration of Carbon Emission Trading (2024)
Guidelines for GHG Monitoring and Reporting for Cement, aluminum smelter and steel industries (2024 and 2025)
Work Plan for National Carbon Market covering steel, cement and aluminum smelter sectors (2025)
Allocation Plan for the Steel, Cement and Aluminum Smelter Sector (2024, 2025)
Opinions of General Office of the CPC Central Committee and the General Office of the State Council on Advancing Green and Low-Carbon Transition and Strengthening the Development of the National Carbon Market (2025)
Japan - Tokyo Cap-and-Trade Program
General Information
The Tokyo Metropolitan Government’s (TMG) Cap-and-Trade Program was launched in April 2010 and is Japan’s first mandatory ETS. It covers around 20% of the metropolitan area’s emissions.
The Tokyo ETS covers CO2 emissions from large buildings, factories, heat suppliers, and other facilities that consume large quantities of fossil fuels. Covered facilities must surrender compliance units for emissions that exceed their baseline, which is based on absolute historical emissions and a compliance factor. Compliance factors are determined based on the type of facility and factors such as expected energy efficiency gains and the extent to which they consume energy supplied by other facilities.
Tokyo’s ETS is linked to the Saitama Prefecture ETS, with credits mutually exchangeable between the two jurisdictions.
The TMG’s Cap-and-Trade Program’s fourth compliance period started in April 2025. The program covers ~1,200 facilities that annually used the energy equivalent to or more than 1,500 kL of crude oil for three consecutive fiscal years. All allowances are freely allocated.
During the fourth compliance period (FY2025 to FY2029), the compliance factor rose to 50% for office buildings and 48% for factories. To boost the use of renewable energy, off-site renewable energy, including self-consignment and PPA, count as zero emissions, and certificates derived from renewable energy can be deducted from energy-related CO₂ emissions. In addition, actual emission factors, instead of fixed emission factors, are used to calculate emissions from electricity, heat, and city gas supplied by retailers, based on contracts at the facilities. A new system for excess emission reductions limits credits to those achieved through energy efficiency or renewable energy; credits are no longer awarded for certification improvements or emission factor adjustments.
In March 2025, the TMG published the results for the fourth fiscal year of the third compliance period (FY2023), showing that emissions from covered facilities totaled 11.32 MtCO2. This is a 31% reduction below base-year emissions.
Emissions & Targets
56.2 MtCO2e* (2023)
* The overall emissions figure for Tokyo is higher than the total of the emissions by sector because the former includes all GHGs, whereas the emissions by sector only measures CO2 emissions.
By 2035: At least 60% reduction from 2000 GHG levels (Zero Emission Tokyo Strategy Beyond Carbon Half)
By 2050: Net zero CO2 emissions (Tokyo Environmental Master Plan)
Average price: ~JPY 585 (USD 3.91)*
*August 2025 estimate. Prices are determined from OTC trading and the TMG estimates recent prices based on interviews. For this reason, no accurate average price can be determined.
Size & Phases
PHASE 1: 1 April 2010 to 30 September 2016
PHASE 2: 1 April 2015 to 31 January 2022
PHASE 3: 1 April 2020 to 30 September 2026
PHASE 4: 1 April 2025 to 30 September 2031
The Tokyo ETS has phases as well as compliance periods (see ‘Compliance’ section). A phase is defined as the compliance period plus an additional 18-month adjustment period, during which time facilities may continue to trade credits in order to reach their targets for the corresponding compliance period.
PHASE 3: 12.2MtCO2 (FY2024)
PHASE 4: 5.9 MtCO2 (FY2030)
The total emissions limit under the Tokyo Cap-and-Trade program is the sum of the bottom-up installation-level emissions limits for all individual covered facilities.
The total emissions limit for the fourth compliance period under the Tokyo ETS is a 50% reduction on average over the five years compared to the base-year emissions which are the average emissions of any three consecutive years between FY2002 and FY2007 (see ‘Allowance Allocation’ section).
Types of fuel covered: Consumption of fuels, heat, and electricity in commercial and industrial buildings. Building owners are subject to surrender obligations, and all tenants are required to cooperate in owners’ reduction measures. Large tenants (those with a floor space above 5,000 m2 or electricity usage per year over six million kWh) are also required to prepare and submit their own emissions reduction report.
INCLUSION THRESHOLDS: Facilities that consume energy equivalent to at least 1,500 kL of crude oil per year for more than three consecutive fiscal years
Downstream (industry, buildings)
~1,200 facilities:
- Office/commercial buildings: ~1000
- Factories: ~200
Allowance Allocation & Revenue
All allowances in the Tokyo Cap-and-Trade Program are allocated for free.
Under the Tokyo ETS, each facility has its own cap, which serves as the “baseline” defining the reduction target it must achieve. Baselines for facilities are set according to the following formula: Base-year emissions x (1 - compliance factor) x compliance period (five years). The compliance factor for each period is determined based on regulations established by the Governor of Tokyo. Prior to the start of each new compliance period, TMG holds expert meetings to gather opinions to aid in determining the compliance factors.
For facilities that have been designated as compliance facilities since the launch of the ETS, base-year emissions are based on average emissions of any three consecutive years between FY2002 and FY2007.
Base-year emissions for new entrants are calculated using either historical emissions (average annual emissions for three consecutive fiscal years of the four fiscal years immediately preceding the compliance period) or an emission intensity standard provided by the government (based on emissions from FY2005 to FY2007).
At the beginning of each new compliance period, all allowances are allocated for free to covered facilities for the full five years. Facilities with emissions below their baseline can receive excess emission reduction credits for the reductions below their baseline. Those facilities that exceed their baseline must purchase and surrender credits from other compliance facilities or offset credits to meet their compliance obligation. Credits may be issued for using renewable energy (see ‘Offset Credits’ section).
COMPLIANCE FACTOR:
First compliance period: 8% or 6% reduction below base-year emissions
Second compliance period: 17% or 15% reduction below base-year emissions
Third compliance period: 27% or 25% reduction below base-year emissions
Fourth compliance period: 50% or 48% reduction below base-year emissions
The lower compliance factor applies to factories and office buildings that use district heating and cooling for more than 20% of their energy consumption.
In the third and fourth compliance period, in medical facilities where electricity is vital to preserve life and health, the compliance factor is two percentage points lower than whichever category would otherwise apply.
The compliance factor is reduced by three percentage points for facilities with an electrification rate of less than 20% in the fourth compliance period alone.
Facilities demonstrating outstanding performance in emission reductions, as well as in the introduction, use, and management of energy efficient equipment, are certified as top-level facilities with the limit on the issuance of excess emission reductions removed.
The reduction of the compliance factor for certified top-level facilities was eliminated in principle except in certain cases in order to recognize facilities that are proactive in reducing emissions.
QUALIFYING FOR ADDITIONAL EMISSION REDUCTION CREDITS THROUGH THE USE OF RENEWABLE ELECTRICITY: In order to evaluate the energy efficiency efforts of the covered facilities, supply side (electricity and others) CO2 emission factors were fixed during each compliance period. Until the third compliance period, if covered facilities procured electricity from TMG-certified suppliers with low emission factors (0.37 tCO2/1,000 kWh or less), they could deduct the difference between these emission factors (actual emission factor of purchased electricity at the covered facility and the fixed emission factor provided by TMG) from their reported emissions to reflect this lower emission factor of purchased electricity. If covered facilities generated electricity from renewable sources for their own use, they could deduct this amount of electricity from the total energy usage of the facility to be reported.
In the fourth compliance period, off-site renewable energy, including self-consignment and PPA, count as zero emissions, and certificates derived from renewable energy can be deducted from energy-related CO₂ emissions. In addition, actual emission factors, instead of fixed emission factors, are used to calculate emissions from electricity, heat, and city gas supplied by retailers, based on contracts with the facilities to evaluate the use of renewable energy at the covered facilities.
Flexibility & Linking
Banking is allowed only between consecutive compliance periods.
Borrowing is not allowed.
The use of offset credits is allowed.
28,200 tCO2e of offset credits were issued in FY2024 and 10,957 tCO2e were surrendered for compliance in FY2024.
QUALITATIVE LIMITS: Four types of offset credits are permitted, based on certification criteria. They complement emission reduction credits issued to facilities covered by the Tokyo ETS whose emissions fall below their baseline:
- Small and mid-size facility credits: Emission reductions from non-covered small and medium-sized facilities in Tokyo.
- Outside Tokyo credits: Emission reductions achieved from large facilities outside of the Tokyo area. Large facilities are those with an energy consumption of at least 1,500 kL of crude oil equivalent in a base year and with base-year emissions of 150,000 tCO2 or less.
- Renewable energy credits: Renewable energy credits generated under the Tokyo ETS encompass the following types: Environmental Value Equivalent, Renewable Energy Certificates, and New Energy Electricity, generated under the Renewable Portfolio Standard Law. Credits from solar (heat, electricity), wind, geothermal, and hydro (under 1,000 kW) electricity production for use under the Tokyo ETS are converted on a one-to-one basis, as are credits from biomass (biomass rate of 95% or more, black liquor excluded).
- Saitama credits (via link): Emission reductions from facilities in Saitama with base-year emissions of 150,000 tCO2 or less.
QUANTITATIVE LIMITS: Quantitative limits apply only for Outside Tokyo credits: these are issued only for the reduction amount that exceeds the compliance factor. These credits can be used for compliance for up to one-third of facilities’ reduction obligations.
All offset credits must be verified by a verification agency.
Tokyo linked its program with the Saitama Prefecture ETS in April 2011. Tokyo and Saitama credits are officially eligible for trade between the two jurisdictions. About 60 credit transfers have taken place so far between Saitama and Tokyo.
- Carbon tax: Japan national carbon tax
- ETS: Japan national ETS (started in April 2026)
Compliance
Five years.
Facilities must submit a “GHG Emissions Reduction Plan” and an implementation status report by the end of November every year.
Compliance units to meet each facility’s targets must be surrendered 18 months after the end of the compliance period (see ‘Phases’ section above).
FRAMEWORK: MRV is based on the “TMG Monitoring/Reporting Guidelines” and the “TMG Verification Guidelines”.
MONITORING: Annual emissions reporting, including emission reduction plans. Seven GHGs must be monitored and reported: CO2, CH4, N2O, PFCs, HFCs, SF6, and NF3. Large compliance tenants, i.e., those with a floor space above 5,000 m2 or over 6 million kWh of electricity use per year, are required to submit their own emissions reduction plans (“Compliance Tenant GHG Emissions Reduction Report”) to TMG in collaboration with building owners.
As of April 2025, actual emission factors, instead of fixed emission factors, are used to calculate emissions from electricity, heat, and city gas supplied by retailers, based on contracts at the facilities. This aims to incentivize the use of renewable energy.
REPORTING: GHG Emissions Reduction Plans including an implementation status report (and Compliance Tenant GHG Emissions Reduction Report if needed) must be submitted by the end of November of the year following the compliance year.
VERIFICATION: Annual emissions reports require third-party verification.
In the case of non-compliance, the following measures may be taken:
FIRST STAGE: The governor orders the facility to reduce emissions by the amount of the reduction shortfall multiplied by 1.3.
SECOND STAGE: Any facility that fails to carry out the order will be publicly named and subject to penalties (up to JPY 500,000 [USD 3,340.95]) and surcharges (1.3 times the shortfall).
Market Regulation
MARKET PARTICIPATION: Compliance facilities, i.e., those above the inclusion threshold (see ‘Sectors and Thresholds’ section); non-compliance facilities (trading account holders). TMG allows only “reduction credits” and not “emission credits”, i.e., one can earn credits only after achieving emission reductions. Only compliance facilities and legal entities with an office in Japan may open trading accounts.
MARKET TYPES:
Primary: All allowances are allocated for free.
Secondary: Covered facilities and other facilities which hold trading accounts trade credits over the counter. Businesses wishing to buy or sell credits can also go through a private intermediary to find a buyer and negotiate the price.
LEGAL STATUS OF ALLOWANCES: Allowances are not financial instruments under the Tokyo ETS.
Covered facilities and other market participants (trading account holders) trade over the counter, and the TMG does not control carbon prices.
Other Information
Tokyo Metropolitan Government: Oversees the Tokyo Cap-and-Trade Program, via the Bureau of Environment
For every new compliance period, the TMG establishes a committee of experts to discuss and determine compliance factors and other important issues for the next compliance period.
The TMG held seven committee meetings from September 2022 to August 2023. It also ran public consultations in June 2023 and in 2025. In July and October 2025, the TMG held two committee of experts’ meetings to align its program with GX-ETS and amended the Tokyo Metropolitan Environmental Security Ordinance in December 2025.
In March 2025, the TMG published the emission reductions results for FY2023,* showing that emissions from covered facilities totaled 11.32 million tonnes, a 31% reduction from the base-year emissions, due to progress in energy efficiency measures and the use of low-carbon electricity and heat.