The national government will set the rules for the eligibility of offset credits when China launches its national carbon market, the 21st Century Business Herald reported, putting an end to regions with vastly differing rules on which CCERs can be used to meet emission targets.

Local governments will not have options to restrict certain types of CCERs in the national market, according to a lengthy interview with an unnamed official in the NDRC’s climate change department, published by the business newspaper.

Designing a functioning offset market is among the main challenges for China as it draws up what will eventually become the world’s biggest emissions trading scheme.

In the seven Chinese pilot schemes, each provincial or municipal government has set its own restrictions on the types of offsets that can be used, which has led to major regional differences in eligibility, and CCER price levels ranging from 5 to 25 yuan.

The NDRC official said China aims to finalise rules by the end of this year on which sectors will be included in the national ETS, as well as threshold levels and allocation methodologies.

The government will finalise allocation of allowances in 2016, and trading will start no later than early 2017, the official said.

Importantly, the official confirmed that if the national market was delayed until 2017, the pilot markets would be allowed to continue for another year. Shanghai recently started preparing a back-up plan in case this happens.

But the NDRC has found that data quality in the pilots vary, and has ordered all the markets to verify emissions from big emitters this year, the report said.

It will also tighten regulations for auditing companies that may have a conflict of interest if they are also involved in trading or consulting.

While no final decision has been made on which sectors will be regulated under the national market, the NDRC has outlined six likely sectors: power, metallurgical industries, non-ferrous metals, building materials, chemicals and aviation.

Several of the pilot schemes have included other sectors in their markets, such as large buildings and auto makers. According to the official in the 21st Century Business Herald report, provinces may also opt to include those in the national ETS, but only if deemed reasonable and local industry accepts it.

The official also said there is yet to be a decision on how to treat carryover allowances from the pilot markets into the national scheme.

The seven pilot markets have millions of surplus allowances that may become worthless if they get banned from the national market. But if allowed, they will give holders a competitive advantage over emitters in regions without pilot markets.

By Stian Reklev – stian@carbon-pulse.com

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