China to Add Cement, Steel, and Electrolytic Aluminum to ETS
China has launched a public consultation on expanding the national emissions trading scheme (ETS) to include sectors such as cement, steel, and electrolytic aluminum, with emissions coverage to start from 2024, according to a notice from the Ministry of Ecology and Environment (MEE) on Sept. 8.
China’s ETS was launched in July 2021 to cover only power generation entities, accounting for around 5 million metric tons of carbon dioxide equivalent (tCO2e) emissions annually.
With the inclusion of the new sectors starting from the compliance year 2024, the national ETS would cover about 60% of China’s total emissions, according to the MEE.
Around 1,500 new key emitting entities will be added, covering an additional 3 billion tCO2e of emissions, MEE noted. Like the power sector, entities emitting over 26,000 tCO2e/year will be included.
Free allowances will be allocated to newly covered sectors based on emission intensity, with the overall allocation mostly aligned with actual emissions over the first two to three years to provide time for capacity building, the MEE said.
The MEE’s explanatory note highlighted that the national ETS has not yet met expectations as a market mechanism, primarily due to low activity and a lack of diverse participants, and it falls behind more established markets like the EU’s ETS.
Between 2022 and 2023, 263 million metric tons of Chinese Emission Allowances (CEAs) were traded, marking a 47% increase from the first cycle. However, this volume remains significantly below the total covered emissions for compliance years 2021 and 2022, which exceeded 10 billion tCO2e.
The CEA last closed at 89.98 yuan per metric tons (mt) ($13.08/mt) on Monday, according to Shanghai Environmental and Energy Exchange data.
The first compliance deadline for the three sectors will be at the end of 2025. The consultation will close on September 19.
($1 = CNY 7.10)
Reporting by Lujia Wang, lwang@opisnet.com
Editing by Hanwei Wu, hwu@opisnet.com
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