China releases timeline for first compliance cycle and MRV documents

In the last week of March 2021, the Ministry of Ecology and Environment (MEE) of China released two main policy documents on monitoring, reporting, and verification (MRV), which also outline the timeline for the first compliance period.
 

Following the launch of the operational phase of the national ETS, this latest release represents another key milestone for ETS implementation in China (for ICAP’s factsheet on China’s national ETS, see here). The “Notice on Strengthening the Management of Enterprise Greenhouse Gas Emissions Reporting” establishes key actions and dates for MRV, summarized as follows.
 

• Reporting: covered entities must submit GHG emissions data, relevant production data, and supporting materials for their 2020 emissions by 30 April 2021 (2019 reporting has already taken place).
• Verification: the above reports must be verified by 30 June 2021.
• Final allowance allocation approval for 2019 and 2020: At first, entities receive allowances at 70% of their 2018 output multiplied by the corresponding benchmark. This will be adjusted to reflect actual generation in 2019 and 2020, resulting in total free allocation. The allocation process with adjustments for recent output will be completed by 30 September 2021.
• Compliance for 2019 and 2020: covered entities need to complete their compliance by 31 December 2021.

Seven other sectors (petrochemical, chemical, building materials, steel, nonferrous metals, paper, and domestic aviation) that are expected to be gradually covered under the national ETS face reporting obligations but under an extended timeline, with reporting by 30 September and verification by 31 December 2021. In addition, the provincial ecological and environmental authorities will submit the list of covered entities in the power sector for 2021 by 30 September 2021 (this was already completed for 2019 and 2020).

Attached to this notice, the MEE also published the final version of the “Guidelines on Enterprise Greenhouse Gas Emissions Accounting and Reporting − Power Generation Facilities”. As reporting of the eight sectors’ emissions is an ongoing process that covers annual emissions since 2013, the final version contains several changes and adjustments compared to previous practices. Those include facility-level reporting for power generation sector, adjustments to sub-sector categories under the eight main sectors, greater clarity on reporting frequency, and further detail on reporting standards and methods.

Lastly, the MEE published the final version of the “Guidelines for Enterprise Greenhouse Gas Verification (Trial)”. Provincial-level ecological and environmental authorities will organize the verification of GHG reports through an eight-step process that gives special attention to quality control, transparency, and avoiding conflict of interest. The entities are requested to prepare a Data Quality Control Plan, which includes basic information of the emission facilities, accounting boundaries and methods, the ways to determine activity data, emission factors, and other relevant information, as well as internal quality control and quality assurance related provisions. Verification results will be made publicly available.

The service agencies involved in the verification are prohibited from engaging in other activities that may damage their objectivity and impartiality, such as providing monitoring, measurement, reporting, or allowance management services to covered entities, sharing management or ownership with the company whose emissions they verify, carbon asset management, or carbon trading activities.