China is unlikely to meet its goal of launching its national carbon market next year as a lengthy legislative process and regulatory uncertainties are expected to cause delays, analysts at Thomson Reuters Point Carbon said.
A senior government official said on the sidelines of the UN climate summit in Paris last month that China will include around 10,000 companies from the start when the national ETS begins in early 2017, instead of starting smaller and gradually expanding until 2020 as was the original plan.
But in a new report, Point Carbon analysts suggested the new goal might be too ambitious.
“We expect Chinese carbon regulators will miss the target and a national market covering all provinces will not take shape in 24 months,” the report said.
Even though a draft law underpinning the ETS has already been circulated among policymakers in Beijing, Point Carbon said the process to finalise the legislation is likely to be lengthy due to the number of government institutions that will be involved.
The law is being drafted by the NDRC but several other bodies, including the Ministry of Finance and the China Securities Commission, will chime in before the law goes to the legislative office of the State Council, China’s cabinet.
The analysts also pointed out that China often makes abrupt changes to policies even after rules and guidelines have been published, and they said any such moves in relation to the carbon market might hamper the implementation of China’s national ETS.
Issues concerning reliable data for all the emitters have yet to be resolved, raising questions over the allocation process, they added.
The report also warned that a number of CCER projects might be left stranded as the government has not made any consideration as to whether offset projects are implemented in ETS or non-ETS sectors.
Point Carbon said 369 registered and planned projects have the potential to generate nearly 48 million CCERs annually, but that many of those are in ETS sectors and might run into problems depending on how China addresses the double-counting issue.
“One plausible way to avoid double-counting is to revise the criteria of CCER projects to reject issuances from projects within the coverage of the compliance market. Such a revision will literally make many of the existing offset projects worthless,” it said.
By Stian Reklev – email@example.com