On 27 May 2019, the Chinese Ministry of Ecology and Environment (MEE) issued a notice (Chinese) to regional governments to submit lists of power plants that meet the threshold for inclusion in the national ETS. This marks another key step to prepare for the launch of the national ETS and follows the release of draft interim regulations on the management of the ETS in April 2019.

According to the Notice on Submitting the Lists of Key Emissions Units in the Power Generation Sector and Related Materials, power plants (including coal-fired, combined heat and power, biomass, and captive power plants of other sectors) that emitted at least 26,000 tons of CO2 (energy consumption of 10,000 tons of standard coal equivalent) in any year between 2013-2018 will be covered. These covered entities are called “key emissions units” in the Chinese ETS. The national ETS is expected to cover some 1,700 companies accounting for more than three billion tons of CO2e per year in its initial phase and then gradually expand to other key emitting sectors, including petrochemical, chemical, building materials, steel, nonferrous metals, paper, and domestic aviation.

The notice further orders the Ecological Environment Agencies (Bureaus) at the provincial and regional levels to assign two administrators each for the national registry as well as to ensure the key emissions units identify personnel responsible for handling the trading platform and registry.

According to the Work Plan for Construction of the National Emissions Trading System (Power Sector), released in 2017, China is currently in the first phase of national ETS implementation — the infrastructure completion phase — and is expected to begin simulation trading for the power sector later this year (see more details in the article “Learning by doing: China’s dynamic approach to ETS” in the recently released ICAP Status Report 2019). The assignments included in this notice lay the foundation for simulation trading for the power sector by preparing regional governments and covered entities for the critical work of allocating allowances, opening accounts in the registry, and test running the market.

The deadline for completing these assignments is 19 July, although some media reporting (Chinese) has highlighted potential difficulties for all the regions to meet this tight timeline given that some of them have not finished their 2018 historical data reporting and verification.