On 24 January 2019, the Ministry of Ecology and Environment (MEE) published a notice requiring all regional ecology and environment bureaus to organize the work on reporting and verifying 2018 emissions data from eight sectors of the economy - power (including captive power plants of other sectors), petrochemical, chemical, building materials, steel, nonferrous metals, paper and domestic aviation. Although the national Chinese Emissions Trading System (ETS) is scheduled to start with the power sector, coverage will gradually be extended to include all of the aforementioned eight sectors.

According to the “Work Plan for Construction of the National Emissions Trading System (Power Sector)”, China is currently in the first phase of national ETS implementation: the infrastructure completion phase. A major part of this is the monitoring, reporting and verification (MRV) of emissions, as outlined by the director of the Department of Climate Change Department (DCC) of the MEE, Li Gao, during a press conference at the end of 2018.

The collection of robust and reliable emissions data has been a major focus for the Chinese national system over the past years. Since 2014, companies in those eight sectors emitting more than 26,000 tCO2e per year (energy consumption of more than 10,000 tce) have been subject to greenhouse gas reporting and verification requirements. This process has been continually refined, with the 2016-2017 data collection notice including additional categorization and verification requirements from the National Development and Reform Commission.

This year, companies are required to submit their 2018 emissions reports by 31 March. The reports are then subject to third-party verification, as well as additional spot checks and expert review by the regional competent authorities. The final data, together with emissions reports, supplementary data sheets, and audited monitoring plans (for new companies entered in 2018) must then be submitted to the Department of Climate Change Department (DCC) of the MEE by the end of May.

Other major tasks for 2019 regarding the preparation for the national Chinese ETS include establishing and improving national ETS regulations, accelerating the development of market infrastructure, promoting carbon management for key enterprises, as well as strengthening capacity building activities. This builds on top of the preparatory work done in China in 2018, which included the plans for a national registry and trading platform, the development of a direct GHG reporting system for national enterprises and the establishment of a working group focusing on power sector and ETS. Further work was also conducted on key design elements of the national ETS, such as allowance allocation and risk management.

Once the preparatory work is completed, China will enter the second phase of ETS implementation, with simulation trading in the power sector expected to start later this year. Finally, this will be followed by the third phase: deepening and expanding, which will see the start of compliance obligations for the power sector and then the increased coverage of the national ETS to seven additional sectors.