ANALYSIS: Provincial preparations, speed bumps ahead of China’s national ETS

Published 14:11 on April 13, 2016  /  Last updated at 17:48 on April 13, 2016  /  China, China's National ETS  /  No Comments

Jiangsu province has identified 398 companies that meet the criteria to participate in China’s national cap-and-trade programme due to be launched next year, as officials and emitters across the country scramble to meet government deadlines.

Jiangsu province has identified 398 companies that meet the criteria to participate in China’s national cap-and-trade programme due to be launched next year, as officials and emitters across the country scramble to meet government deadlines.

The eastern province, home to 80 million people and with a 2015 GDP of nearly $1.1 trillion, is among China’s biggest-emitting regions, with steel, chemicals and textiles fuelling the economy.

The Development and Reform Commission of the Jiangsu city of Xuzhou this week published the number of companies to be included in the ETS, but did not release names. Many of the companies will have more than one facility covered.

Central government officials have estimated around 10,000 companies will join the national carbon market from 32 administrative units.  Hong Kong and Macau will not be included.

The Jiangsu number emerged after the central government gave provinces and regions a Feb. 29 deadline to submit a list of companies in the identified ETS sectors that consumed more than 10,000 standard tonnes of coal equivalent in any year between 2013-2015.

Participation numbers from other provinces are expected to emerge, and the NDRC has said it plans to publish a list of all ETS participants when it is ready.

DATA

Officials and emitters are both facing future deadlines as China prepares to launch its national ETS in H2 2017.

All the companies that have been picked to join the ETS must submit independently-verified emissions data to the government by June 30, yet the availability of accredited auditors is limited.

Unlike in the EU, the Chinese government pays auditing bills for emitters in an attempt to ensure there are no undue ties between the emitter and auditor. But this is proving a challenge for some cities amid China’s slowing economy.

Xuzhou, the Jiangsu city releasing this week’s statement that will see 46 of its local firms brought into the scheme, said it is currently trying to find funding for the auditing work, as well as for building capacity to carry out future MRV work.

Getting credible historical data from enterprises that only over the past year or two began reporting their CO2 emissions is considered one of the biggest preliminary challenges for China’s ETS.

When the EU ETS began in 2005, a lack of historical data allowed emitters to overestimate their emissions, a move that eventually led to a complete collapse in EUA prices in the scheme’s first phase as the market had been over-allocated.

China is working hard to avoid the same fate, but the time pressure to get the country’s huge industry ready may create stumbling blocks.

Jiang Zhaoli, a senior climate change policy official with the NDRC, told a conference in Beijing last week that his organisation has a June 30 deadline to submit to the State Council (China’s Cabinet) an allocation plan, as well as the total number of emissions that will be covered by the ETS.

That is the same day covered emitters must report their historical data to the NDRC.

CAPACITY-BUILDING

At the same time, the central government has kick-started a nationwide programme to get the non-pilot regions up to speed in emissions trading.

A national capacity-building centre was recently established with the Shenzhen carbon exchange, but other pilot bourses as well regularly send officials to other provinces to teach government staff and company representatives about emissions markets.

Foreigners participate in this as well, including the EU through its development agency EuropeAid, through which it has put millions of euros towards building carbon market capacity in China.

“We are planning a national ETS event on Apr. 27,” said Renato Roldao of consultancy ICF International, who heads up the EU-China bilateral carbon market programme.

“In the week of [April] 25th we will have a full week of project activities with [officials from] all provinces and regions in China, and a kick-off of joint research activity,” he added.

ICF is also planning a new training programme that will have included over 1,500 Chinese participants by the end of the October, Roldao said.

Germany, Norway and the UK are funding additional programmes to get China ready for the market launch.

Even more important in terms of getting local officials and emitters ready is when powerful institutions other than the NDRC embrace the carbon trading plans, such as last month when the central bank gave its full support to the scheme.

But the workload is immense, and analysts Thomson Reuters Point Carbon in January predicted the scheme was unlikely to start on time, largely due to the lengthy process required to enshrine the ETS in law.

A bill on China’s planned national emissions trading scheme has been passed to the State Council for approval by the country’s top economic planning agency, with no changes from an earlier draft, a leaked document showed last month.

By Stian Reklev – stian@carbon-pulse.com

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