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Published on: December 18, 2017

Original title: 国家发展改革委关于印发《全国碳排放权交易市场建设方案（发电行业）》的通知
Links: Source document (in Chinese) (link).

National Development and Reform Commission

Circular on publishing the "Program for the establishment of a national carbon emissions trading market (power generation industry)"

NDRC Climate [2017] No. 2191

To the people's governments of provinces, autonomous regions, directly-controlled municipalities and of municipalities with independent planning status, Xinjiang Production and Construction Corps, Ministry of Foreign Affairs, Ministry of Education, Ministry of Science and Technology, Ministry of Industry and Information Technology, Ministry of Civil Affairs, Ministry of Finance, Ministry of Land and Resources, Ministry of Environmental Protection, Ministry of Housing and Urban-Rural Development, Ministry of Transport, Ministry of Water Resources, Ministry of Agriculture, Ministry of Commerce, Health and Family Planning Commission, State‑owned Assets Supervision and Administration Commission, State Administration of Taxation, General Administration of Quality Supervision, Inspection and Quarantine, National Bureau of Statistics, State Forestry Administration, State Administration of Taxation, Legislative Affairs Office, Chinese Academy of Sciences, China Meteorological Administration, State Oceanic Administration, National Railway Administration, Civil Aviation Administration, People's Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission, Certification and Accreditation Administration:

In order to implement the strategic policy decision of the Central Committee of the Communist Party and of the State Council on establishing a national carbon emission allowance trading market, and to steadily promote the construction of the national carbon emission allowance trading market, with the approval of the State Council, the "Program for the establishment of a national carbon emissions trading market (power generation industry)" is hereby issued to you, and you are requested to implement it。

Annex：Program for the establishment of a national carbon emissions trading market (power generation industry)

National Development and Reform Commission

December 18, 2017

Annex

Program for the establishment of a national carbon emissions trading market (power generation industry)

The establishment of a market for carbon emissions rights is a key step in utilizing market mechanisms in controlling greenhouse gas emissions, and is also urgently needed in order to deepen reform towards an ecological civilization, will aid in reducing societal costs associated with emission reductions, and will help promote the green and low-carbon transition and upgrading of the economy。In order to soundly promote the construction of the national carbon emission rights trading market (hereinafter referred to as "carbon market"), to ensure a smooth start of the national ETS in 2017, and in accordance with the "Outline of the 13th Five-Year Plan for National Economic and Social Development of the People's Republic of China" and the "Integrated reform plan for an Ecological Civilization", this program was formulated。

I. Overall requirements

(1) Guiding principles

Thoroughly implement the spirit of the 19th NPC, hold high the great banner of socialism with Chinese characteristics, adhere to guidance by Xi Jinping's socialism with Chinese characteristics for a new era, closely follow and comprehensively promote the "five in one" overall layout and coordinatedly promote the "four comprehensive" strategic layout, firmly establish the concept of development based on innovation, coordination, environmental friendliness, openness and inclusiveness, earnestly implement decision-making by the Central Committee of the Communist Party and the State Council on the construction of an ecological civilization, give full play to the role of market mechanisms in controlling greenhouse gas emissions, steadily promote the establishment of a unified national carbon market, in order for our country to effectively control and gradually reduce carbon emissions, and make new contributions to promoting green and low-carbon development。

(2) Basic principles

Adhere to guidance by markets, and government in a serving role。Carry through implementation of reform requirements on streamlined government and decentralization of decision-making and administrative management, and optimization of government services; with enterprises as the key actors, and with guidance by markets, strengthen government regulation and services, and give full play to the market's decisive role in the allocation of resources。

Adhere to addressing easier issues first, step by step progress。In accordance with national government's overall requirements on the construction of an ecological civilization and controlling greenhouse gas emissions, under the premise of not influencing steady and healthy economic development, carry out step by step, staged promotion of the carbon market。In the power generation industry (including combined heat and power generation, the same in the rest of the text below), take the lead in launching a national carbon emissions trading system, gradually expand the scope of industries participating in the carbon market, increase varieties of tradeable products, and constantly improve the carbon market。

Adhere to coordination and cooperation, and wide-ranging participation。Coordinate international and domestic situations, coordinate regional and industry needs for sustainable development and controlling greenhouse gas emissions, and in accordance with overall plans for supply-side structural reform, strengthen coordination with related policies and measures such as the reform of power system, the "double control" of the total amount and the intensity of energy consumption, and the prevention and control of air pollution。Continue to optimize and perfect the carbon market system design, fully mobilize initiative from government departments, local governments, enterprises and societal actors, and jointly promote and improve the carbon market。

Adhere to a unified standard, equity and openness。Unify market access standards, quota allocation methods and related technical specifications, construct a unified nationwide emission reporting system, registration system, trading system and settlement system, and other market support systems。Build a market environment conducive to fair competition, timely and accurately disclose market information, and fully accept supervision by societal actors。

(iii) Objectives and tasks

Adhere to the role of the carbon market as a policy tool for controlling greenhouse gas emissions, and effectively preventing financial and other risks。With the power generation industry breaking through and taking the lead in launching the national carbon emissions trading system, train the main market actors, improve market supervision, gradually expand the market coverage, and increase the variety of tradeable products and of trading methods。Gradually establish a carbon market with clear ownership, strict protection, smooth circulation, effective supervision, transparency and openness, and international influence。With reasonable and moderate total quota volumes and prices, effectively stimulate the emission reduction potential of enterprises, promote the transformation and upgrading of enterprises, and achieve greenhouse gas emission goals。From the issuance of this plan onwards, the construction of the carbon market will be steadily promoted in three phases。

Period of basic infrastructure establishment。Using approximately one years' time, complete construction of a unified national data reporting system, registration system and trading system。Thoroughly build capacities, and enhance the capacities and management level of various types of participants。Establish an administrative management system for the carbon market 。

Period of simulated operation。Using approximately one years' time, carry out simulated trading of quota in the power generation industry, comprehensively test the effectiveness and reliability of the various elements of the market, strengthen mechanisms for early warning and control of market risks, and improve the administrative management and support system for the carbon market。

Period of deepening and perfecting。Carry out spot market trading for quota between participants in the power generation industry。The purpose of these transactions is only to fulfill obligations (to fulfill emission reduction obligations), quota submitted to fulfill compliance obligations are cancelled, and remaining quota may be transferred and traded across compliance periods。Under the premise of a stable operation of the carbon market in the power generation industry, gradually expand the market coverage, and expand tradeable products and trading methods。Create the conditions for the earliest possible inclusion of nationally certified voluntary emission reductions into the national carbon market。

 

2. Market elements

(iv) Market participants。The key emitting enterprises in the power generation industry are the market participants in the initial phase。When conditions allow, this will be expanded to other industries with high energy consumption, high pollution and high resource intensity。In due course, other organizations and individuals that conform with trading regulations should participate in trading。

(v) Tradable products。Spot trading of quota will be the trading mechanism in the initial phase. When conditions allow, expand with products that conform with trading regulations such as nationally certified voluntary emission reductions and other tradable products。

(vi) Trading platform。Establish of a nationally unified, interoperable, strictly regulated carbon emissions trading system, and incorporate it into administrative management system of the national public resources trading platform。

 

3. Participants

(vii) Key emitting enterprises。The key emitting enterprises are the enterprises or other economic organizations in the power generation industry with annual emissions of 26,000 tons of carbon dioxide equivalent (total energy consumption of circa 10,000 tons of standard coal eq.) or above。On-site power plants in other industries with annual emissions of 26,000 tons of carbon dioxide equivalent and above are dealt with as key emitting enterprises in the power generation industry。Starting with this group, the range of key emission enterprises will gradually be expanded。

(viii) Regulatory bodies。The Development and Reform department under the State Council and other relevant departments shall jointly implement hierarchical supervision over the carbon market。The Development and Reform department under the State Council, in conjunction with the departments in charge of relevant industries, shall formulate the quota allocation plan, specification for verification technologies, and supervise implementation。The various relevant departments shall supervise third-party verification agencies and trading institutions according to their respective division of responsibilities。Departments in charge of climate change at the provincial level and of municipalities with independent planning status shall supervise data verification, quota allocation, and obligations by key emitting enterprises within their respective jurisdictions。All departments and all local governments should perform their respective functions and cooperate with each other, to ensure orderly operation of the carbon market。

(ix) Verification bodies。Verification agencies that conform with relevant requirements, based on the relevant provisions and technical specifications for verification, are entrusted to carry out verification of carbon emission related data, and issue independent verification reports, ensuring that the verification report is true and credible。

 

4. System establishment

(x) Carbon emission monitoring, reporting and verification system。The department for Development and Reform of the State Council, in conjunction with authorities for the relevant industries, shall formulate measures for the administrative management of the industries' emissions reporting, and shall improve the guidelines and technical specifications for the industries' greenhouse gas accounting and reporting。Departments in charge of climate change at the provincial level and of municipalities with independent planning status shall carry out tasks for the validation and submission of data。Key emitting enterprises shall, in accordance with relevant provisions, timely report carbon emissions data。Key emitting enterprises and verification agencies are responsible for the truthfulness, accuracy and completeness of the data。

(xi) Key emitting enterprises' quota management system。The department for Development and Reform of the State Council is responsible for formulating the quota allocation standards and methods。Departments in charge of climate change at the provincial level and of municipalities with independent planning status shall allocate quota to key emitting enterprises within their jurisdiction in accordance with the standards and methods。Key emitting enterprises shall take effective measures to control carbon emissions, and clear quota in accordance with actual emissions ("clearing" refers to the process of balancing the amount of quota submitted with the amount of quota that should be submitted)。Departments in charge of climate change at the provincial level and of municipalities with independent planning status are responsible for supervising settlement, and shall, in accordance with the law and regulations, penalize key emitting enterprises that are too late with settlement or that settle insufficient quota, and enter the relevant information into the national credit information sharing platform and implement joint disciplinary action。

(xii) Market transactions related systems。The department for Development and Reform of the State Council, in conjunction with other relevant departments, will formulate administrative measures for the market for trading carbon emission rights, and shall formulate regulations on main trading participants, trading methods, trading practices and market supervision, etc., establish a price formation mechanism that reflects the relationship between supply and demand and emission reduction costs, establish an adjustment mechanism to effectively prevent abnormal price fluctuations and establish a risk prevention and control mechanism to guard against market manipulation, to ensure all required elements of the market are in place, and have an open and transparent, and orderly operation of the carbon market。

 

5. Quota management in the electric power industry

(xiii) Quota allocation。Quota for the electric power generation industry are allocated according to allocation standards and methods determined by the Development and Reform Department of the State Council in conjunction with the Energy Department (the quota allocation standards and methods for the electric power generation industry shall be separately formulated)。

(xiv) Quota submission。Key emitting enterprises in the electric power generation industry shall annually submit quota equal to the actual carbon emissions of the same year to the departments in charge of climate change at the provincial level or of municipalities with independent planning status, in order to fulfill their emission reduction obligations。Surplus quota can be sold on the market, whilst quota shortages need to be purchased on the market。

 

6. Support system

(xv) Carbon emission data reporting system for key emitting enterprises。Establish a nationally unified, hierarchical administrative management system for carbon emissions data reporting, and explore connecting this with the national online monitoring system for energy consumption。

(xvi) Registration system for carbon emission allowances。Construct a unified national registration system for carbon emission allowances as well as a disaster recovery system for it, in order to provide legal confirmation and registration services for carbon emission allowances and nationally certified voluntary emission reductions for various market actors, and to realize administrative management of quota clearing and fulfillment of obligations。The department of Development and Reform under the State Council is responsible for formulating the administrative management measures and technical specifications for the system for carbon emission allowance registration, and will supervise the implementation of the carbon emission allowance registration system。

(xvii) Trading system for carbon emission allowances。Construct a unified national carbon emission allowance trading system and a disaster recovery system for it, providing trading services and integrated information services。The department of Development and Reform under the State Council, in conjunction with relevant departments, will formulate the administrative management measures and technical specifications of the trading system, and will supervise the implementation of the carbon emission allowance trading system。

(xviii) Settlement system for carbon emission allowances trading。Establish a settlement system for carbon emission allowance trading, realizing settlement and management of trading funds, and providing inquiry services, consultation and other services related to quota settlement, ensuring trading results are truthful and credible。

 

7. Pilot transition

(xix) Promote transition of regional carbon trading pilots to a national market。The regional carbon trading pilot areas established since 2011 should gradually incorporate eligible key emitting enterprises into the national carbon market, realizing unified administrative management。The regional carbon trading pilot areas shall continue to perform their existing roles, and gradually transition to a national carbon market when conditions allow。

 

8. Safeguard measures

(xx) Strengthen organizational leadership。The department of Development and Reform under the State Council, in conjunction with relevant departments, shall timely adjust and perfect the program described here as required. Important issues shall promptly be reported to the State Council。All departments should strengthen supervision over the carbon market, in accordance with the division of responsibilities, and in accordance with actual conditions。

(xxi) Strengthen implementation of responsibilities。The department of Development and Reform under the State Council, in conjunction with relevant departments, will be responsible for construction of the national carbon market。The people's governments at the provincial level or of municipalities with independent planning status are responsible for tasks regarding the construction of the carbon market within their respective jurisdictions。Eligible provinces (municipalities) are entrusted by the Department of Development and Reform of the State Council to set up and operate support systems related to the national carbon market, and after this has been set up, will be connected with the unified national data exchange and sharing platform。

(xxii) Promote capacity building。Organize training for capacity-building for various market actors, and promote relevant international cooperation。Encourage relevant industry associations and central enterprise groups to carry out data surveys, statistical analysis, etc. of industry carbon emission allowances, to provide technical support for the science-based determination of quota allocation standards。

(xxiii) Properly guide the dissemination of information。Strengthen the dissemination of information on green, circular, low-carbon development and on policies and regulations related to the carbon market, spread knowledge on the carbon market via various media, publicize and promote advanced experience and established practices, enhance the importance given to and level of knowledge of carbon emissions reduction and the carbon market by industry and the public, and create a very good public attitude for the construction and operation of the carbon market。