Capacity building for emissions trading schemes
Project title: Capacity building for emissions trading schemes (ETS) in China
Commissioned by: German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU)
Lead executing agency: Ministry of Ecology and Environment (MEE)
Cooperation partners: Development and reform commissions (DRCs) in the pilot regions; regional carbon markets and institutions
Overall term: 2012 to 2019
China has published new greenhouse gas (GHG) reduction commitments in preparation for the 2015 Paris climate negotiations. The country will reach its peak emissions level by 2030. It also intends to reduce its emissions per unit of GDP by 60 to 65 per cent during the same period. China had already committed itself to a 40 to 45 per cent reduction in emissions intensity by 2020. An emissions trading scheme (ETS) is being introduced on a gradual basis in order to achieve these targets.
This makes China the first emerging economy to launch a trading scheme to limit GHG emissions. A pilot phase for this complex market instrument has been running since 2013 in Beijing, Shanghai, Tianjin, Chongqing and Shenzhen, as well as in Guangdong and Hubei Provinces. The project will provide advice and training to further support the nationwide roll-out of the ETS from 2016.
The key Chinese institutions have the knowledge, resources and political leverage required to develop and operate an emissions trading scheme at local and national level.
The project provides specialist advice and training to government institutions in the pilot regions, dealing with the following aspects of emissions trading: market design and surveillance, regulation and legislative framework, definition of emissions caps, allocation mechanisms, trading platforms and carbon registries. The exchange of experiences with German and European institutions plays a substantial role in this context.
The project involves the private sector at local level, providing information and training to relevant companies, plant operators, carbon markets and certification firms to familiarise them with emissions trading, its application and its unique features in the different sectors. This work focuses on practical implementation and monitoring and reporting requirements.
Lessons learned in the pilot regions are compiled and submitted to the Chinese Government. Along with advice from German and other European experts, these experiences are then used in the design process for the national emissions trading scheme. Staff from national institutions are being trained for the country-wide roll-out of the ETS.
The project has helped to establish the local trading platforms, advised local government institutions, and conducted training for companies from the key industries in the respective pilot regions. Company representatives have engaged in dialogue on regulations, strategies and their implementation with European industry representatives and national experts from their sector.
The project advised local carbon markets on how to establish and structure trading platforms, working with the European Energy Exchange (EEX) – the leading auction platform in Europe – to train them in the relevant skills.
In Shanghai and Shenzhen, it assisted with the development and adaptation of technical regulations for measuring and reporting on GHG emissions in a range of sectors.
Shenzhen commenced trading in emissions certificates, the first of the seven pilot regions to do so. A report on the first year of trading, containing an analysis, policy options and recommendations, was submitted to both the local and the national government. The experiences from Shenzhen are reflected in the planning process for the national scheme.
In preparation for the national ETS roll-out, representatives of Chinese provincial authorities travelled to Germany where they underwent intensive training in emissions trading.
Now that the pilot regions are trading successfully in emissions certificates and initial experience has been gained, the project is stepping up its efforts to assist the Chinese Government with preparing for and putting in place the national ETS. These efforts concentrate on establishing the necessary legislative framework and national institutions.