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Carbon Emission Trading Market to be Phased in for China’s Power Generation Sector

China is to launch a three-stage carbon trade initiative designed to allow market forces to reduce the overall level of carbon emissions within the country’s power generation sector, while promoting environmentally-friendly/low-carbon development. The proposed three stages are as follows:

1. Infrastructure Construction

Phase one of the project will focus on establishing a national data submission system, as well as a registration system and trading system. This is expected to be completed within a 12-month period.

2. Testing

The second phase will involve the simulated trading of power generation quotas. This is intended to evaluate the effectiveness and reliability of various key elements of the market trading system, while ensuring the proposed alarm systems and remedial measures relating to a range of market risks function effectively. This is, again, expected to be completed within a 12-month period.

3. Fine Tuning

In the third and final phase, a pilot programme will see quota spot trading permitted between businesses active in the power generation sector. This will allow them to meet their statutory emission reduction requirements via the trading system established in phases one and two, with any surplus carbon credits eligible to be transferred or traded at a later date.

Assuming this trial period is deemed a success, the programme will gradually be enhanced by the addition of wider range of trading options. A facility allowing for the inclusion of officially-verified voluntary emissions reductions will also be added in at a later date.

This initiative was outlined in The Plan for Building the National Carbon Emission Trading Market (Power Generation Industry), as recently circulated by the National Development and Reform Commission.

For further details (in Chinese), please visit the following link:

Notice of the NDRC on Issuing the Plan for Building the National Carbon Emission Trading Market (Power Generation Industry (No. 2191 [2017])

Content provided by Picture: HKTDC Research
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