On 15 October 2024, the Chinese Ministry of Ecology and Environment (MEE) released the allocation plan and compliance work plan for the power sector (in Chinese) for 2023 and 2024. Following a draft proposal shared in July 2024 for public input, the final version includes minor adjustments but largely aligns with the initial plan.
Updated benchmarks
The updated output-based benchmark allocation method sets stricter values for 2023 and 2024 compared to 2022. In 2023, the benchmarks for four types of coal-fired power generators, as well as for coal- and gas-fired heat generation, have been set at more stringent levels compared to 2022. Looking ahead, the benchmarks for 2024 are set to be slightly stricter than those for 2023. The new values mostly match the draft proposal, with minor increases to some values and simplified adjustment factors. Detailed information on the new benchmark values can be found in the linked table.
The new allocation plan excludes indirect emissions and removes the heat supply adjustment factor, which was previously based on the ratio of heat production and proved challenging to verify. As in previous compliance periods, all allowances will be allocated for free.
Changes in the banking and borrowing rules
The final allocation plan introduces slight adjustments to the rules of banking to increase market liquidity. While the draft version permitted banking of allowances equaling 1.5 times the net allowances sold from 2019-2024, the final rule adds a 10,000 ton baseline allowance, allowing entities to bank up to 10,000 tonnes plus 1.5 times their net sales during this period.
Borrowing allowances from future compliance periods, which was temporarily allowed in 2021-2022, is no longer allowed in 2023 and 2024.
Clarified rules for the use of offset credits
The final allocation plan clarifies policies on offset credits, which was previously regulated in a separate policy paper. The final allocation plan confirms that ETS participants can meet up to 5% of their compliance obligations by using Chinese Certified Emissions Reductions (CCERs). However, only credits from projects registered in the new CCER program - revised in 2023 to enforce stricter standards - will be eligible for use after 2024. CCERs issued under the old scheme, which ran from 2012-2017, may still be used to offset emissions in the 2023 compliance period, but will no longer be valid starting in 2024.
Change to a one-year compliance cycle
As initially proposed in the draft, the compliance cycle is shifting from two years to a one-year cycle. The allocation plan sets out the compliance timelines for 2023 and 2024, which are summarized here.
2023 Timeline
- Provincial Environment Bureaus are required to submit their 2023 allocation plans for each province to the China Carbon Emissions Registration and Clearing Co., Ltd. (the “Registry”) and the MEE by 24 October 2024.
- The Registry will then allocate 2023 allowances to covered entities.
- The covered entities must surrender their 2023 allowances before 31 December 2024 to their respective Provincial Environment Bureaus.
- Provincial Environment Bureaus are required to finish the punishment for non-compliance entities before 28 February 2025 and report to the MEE by 15 March 2025. Provincial Environment Bureaus will also publish this information in the national carbon trading market management platform by 30 April 2025.
2024 Timeline
- Provincial Environment Bureaus are required to submit their 2024 pre-allocation plans for each province to the Registry and the MEE by 31 March 2025.
- The Registry will then pre-allocate allowances to covered entities.
- After the verification deadline on 30 June 2025, the Environment Bureaus must submit their final allocation plans to the Registry and the MEE by 31 July 2025.
- The Registry then adjusts the final number of allowances allocated to covered entities.
- The covered entities must surrender their 2024 allowances before 31 December 2025 to their respective Provincial Environment Bureaus.
- Provincial Environment Bureaus are required to finish the punishment for non-compliance entities before 28 February 2026 and report to the MEE by 15 March 2026. Provincial Environment Bureaus will also publish this information in the national carbon trading market management platform by 30 April 2026.
