China might push back the start of its national carbon market to early 2017, some six months later than planned, to ensure that all the scheme’s rules and regulations are finalised in time, an NDRC climate change official said.
The NDRC announced last year the national ETS would begin in the second half of 2016, but much work remains in designing the market, which is expected to be the world’s biggest carbon market by the end of the decade.
“(Launching in) 2016 is a very aggressive target. If everything goes well, maybe we can launch next year, but personally I think 2017 is more feasible,” Wang Shu, deputy director for climate change at the NDRC, told Carbon Pulse on the sidelines of the Carbon Expo conference in Barcelona on Wednesday.
A delay would likely have modest consequences for the national market, which is expected to cover a limited amount of sectors and regions from the outset and then gradually expand to full coverage by 2019 or 2020.
But it would leave major question marks over what would happen to China’s seven pilot carbon markets in 2016.
Although the central government has yet to clarify exactly what will happen to the pilot markets when the national scheme is introduced, officials have indicated that they would merge or at least adhere to a new set of rules defined by Beijing from 2016.
But if the national ETS is pushed back to 2017, the central government would need to clarify whether – and under which rules – the pilot markets would operate in 2016, the first year of China’s next five-year plan period when new binding carbon targets will be imposed on each province.
Wang confirmed that a certain amount of domestic offsets would be allowed in the national market, but that restrictions would apply.
“Based on the experience of the pilot programmes, we will have some requirements for offsets: firstly they should be CCERs … and secondly we will have some requirements about project types,” he said, identifying large hydro projects as a potential candidate for the restrictions.
He added that, similar to the pilots’ rules, the national offset usage limit would likely be between 5% and 10% of the total cap, but stressed that research into this was ongoing.
“We are working on that this year, so maybe next year we will have some more concrete methodologies.”
He said initially the national scheme will cover only “key” sectors, and the government will calculate the caps for these sectors before setting provincial emissions limits.
He named power, steel, chemicals, non-ferrous metals, cement and aviation as potential candidates for the first sectors to be regulated, and said that any caps on those industries would be used to calculate wider provincial CO2 quotas.
“NDRC just issued official notices to all provinces to clarify some key preparation work about the development of a national ETS … We will mobilise all provinces and ask their governments to help us allocate allowances,” he told Carbon Pulse.
Wang said China may also look into imposing a carbon tax on industries and emissions sources not covered by its national ETS.
He added that the country was not currently looking at “border adjustment measures”, otherwise known as carbon import tariffs, but that they could be considered in the future.
By Mike Szabo and Stian Reklev – email@example.com