On 17 March 2018, the first session of the 13th National People's Congress of China approved the plan to restructure the State Council, including the establishment of a new Ministry of Ecology and Environment (MEE) to replace the Ministry of Environmental Protection (MEP). In addition to environmental governance, the new ministry will absorb the climate change responsibilities currently under the National Development and Reform Commission (NDRC) and take charge of the development of the national emissions trading system (ETS). The restructuring will be a gradual process but it is expected to have some effect on the development of the national ETS.
The general approach to the construction of the national ETS, which was mandated by the Work Plan for Construction of the National Emissions Trading System (Power Sector) (approved by the State Council in late 2017) will continue to guide the development of the market. 2018 marks the first phase of market infrastructure development according to the three-phase roadmap outlined in the Work Plan. Concurrently, the collection of historical emissions is set to be completed by 31 March 2018 and will inform the allowance allocation plan for the power sector.
At the regional level, four out of the seven pilots (Beijing, Guangdong, Hubei and Shanghai) have released their allocation plans for vintage 2017. These plans have shown some common trends, including adjustments to the allocation (e.g., moving from grandfathering to historical intensity or benchmarking) and fine tuning the reduction factors. The allocation plans also confirmed that power companies which also fall within in the scope of the national ETS would be regulated under the pilots for vintage 2017. This aligns with the Work Plan that states the pilots will continue operating in parallel to the national system and integrate once the national market is fully operational.
