China’s ETS law likely pushed to next year, State Council plan shows

Published 12:09 on April 14, 2016  /  Last updated at 12:09 on April 14, 2016  /  China, China's National ETS, China's Pilot Markets  /  No Comments

China’s State Council this week released its legislative plan for 2016, listing the law that will support the planned emissions trading scheme under “preliminary projects”, meaning it is unlikely to be finalised this year.

China’s State Council this week released its legislative plan for 2016, listing the law that will support the planned emissions trading scheme under “preliminary projects”, meaning it is unlikely to be finalised this year.

In the legislative plan released Wednesday, the emissions trading bill was not listed under proposed legislation that China’s Cabinet will strive to finalise this year.

The start of the cap-and-trade programme has been pushed back to the second half of next year, but even that timetable may come under pressure if lawmakers don’t finalise the legislation early next year.

“This shows a weak spot in the Chinese carbon market, namely the lack of legal experts involved. But assuming the legislation plan is inked next April, we may have an ETS law in place in H2, which means the national scheme can still begin before the end of the year,” Chai Hongliang, an analyst with Thomson Reuters Point Carbon, told Carbon Pulse.

In January, Thomson Reuters released a report predicting the market could be delayed beyond 2017, primarily due to the challenging legal process.

But several observers speaking to Carbon Pulse remain confident that the market will start on time since President Xi Jinping announced during a state visit in the US in Sep. 2015 that the ETS would be launched in 2017, and the NDRC has been determined to get the market up and running by then.

“The ETS law should be ready by this time next year, on time to start in the second half of 2017. Sometimes it is hard to anticipate how things go at State Council level, but I am not worried at this stage,” said one observer, who wished to remain anonymous.

The delay has caused some concerns as any last-minute changes forced by other powerful ministries could topple the process. For example, the China Securities Regulatory Commission has made known its opposition to the NDRC’s desire to allow futures trading of CO2 allowances.

“Issues like allocation are central to the regulation, which means everything might be delayed [if there were changes],” a third source said.

In the short term, the news is likely to cause continued uncertainty in China’s seven pilot markets, where a lack of clarity on how they will transition to the national market has put a downward pressure on prices for months.

By Stian Reklev – stian@carbon-pulse.com

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