Emissions Trading Systems—carbon pricing policy instruments for carbon emissions reduction—have become very popular in recent years. Under a typical ETS, a central authority allocates emissions permits to enterprises and requires them to submit permits equal to their emissions for compliance at the end of a “compliance cycle”. Enterprises that are short of permits can purchase them from the permit market, creating a carbon price signal that is crucial to reducing emissions cost-effectively.
Unlike a typical ETS in the developed countries that imposes a hard emissions cap, the main feature of China’s national ETS is its permit allocation rules that guarantee carbon policy stringency without introducing strong adverse shocks to economic growth. China’s national ETS is so far a rate-based system—the permit allocation in each sector is based on the companies’ actual output levels and a corresponding “benchmark” (emissions-output ratio) that matches an appropriate emissions intensity reduction target in that sector. For example, if a plant’s emissions intensity exceeds its predetermined benchmark, it will face an allowance deficit and need to buy permits for compliance. Conversely, a plant with relatively low emissions intensity can sell surplus permits.
China’s national ETS has been in operation for a year now. It has made progress on multiple fronts.
First, the institutional framework has been formed. The National Measures for the Administration of Carbon Emission Trading (Trial), released in December 2020, has provided a regulatory basis. It has been supplemented by additional technical documents for permit registration, trading, settlement, permit allocation, and emissions reporting for the power generation sector. All these directives have gradually formed a “1+N emissions trading policy system”.
Second, infrastructure for the system has been established. The National Carbon Emissions Permits Registry in Wuhan (responsible for recording permit holdings, modifications, payments, and retirements) and the National Carbon Emissions Exchange in Shanghai (serving as a permit exchange) have been operating smoothly.
Lastly, for the monitoring, reporting, and verification of emissions, enterprises have been encouraged to take “on-site” measurements of their coal consumption, significantly improving the integrity of China’s carbon emissions data.
Although there have been important milestones for China’s national ETS in its first year, several challenges were also encountered. There is still no official roadmap for future sectoral coverage. Trading was very much concentrated just ahead of the compliance date, which reveals a less active market which limits price discovery. Risk control regarding data quality still needs to be improved, given that some data manipulation cases were detected.
A medium-and long-term development roadmap is very much needed for China’s ETS. Higher-level legislative support to strengthen market supervision and penalties for non-compliance are also necessary. With regard to the permit allocation, China’s national ETS needs to continuously tighten the benchmarks under a rate-based design and carefully plan a transition to a mass-based system to introduce a clear cap for covered emissions. Moreover, auctioning needs to be introduced to reduce free permit allocation and facilitate price discovery. In the next few years, China’s national ETS is expected to expand from the power sector to multiple industries and eventually to cover more than 8,000 companies, whose emissions account for 70 percent of China’s energy-related emissions. We are confident that a full-fledged national ETS can help China achieve its “dual-carbon” goals and lead the development of a global carbon pricing regime in the near future.
【小题1】Which of the following statements best describes ETS?| A．A market providing stage for emissions permits trade. |
| B．An approach encouraging alleviation of carbon emissions. |
| C．An implement marking the innovation of China’s ecological administration. |
| D．A system confining industries’ carbon emissions. |
| A．The ETS was first raised by China all around the world. |
| B．Industries cannot release carbon exceeding the allocated permits under the ETS. |
| C．In China the ETS is only adopted within the power sector for now. |
| D．The permit allocation for each company depends on its producing capability under the ETS. |
| A．It possesses more flexibility as opposed to western ones. |
| B．It shows great resilience before economic shocks. |
| C．It complies with the market principles. |
| D．It may bring more incomes to the companies. |
| A．The ETS: Insight And Outlook |
| B．The ETS: Reduce Carbon Emissions |
| C．The ETS: A Milestone Of Ecological Administration |
| D．The ETS: Permits Can Be Bought |
