context: Steel, cement and aluminium smelting industries are set to be included in the national carbon market in 2025. The quota allocation plan outlines the basis for their inclusion, which is largely similar to the slow and steady approach used for the power sector when the carbon market first began in 2021. A central directive issued in August this year aims to expand coverage to all major industrial sectors by 2027.
An MEE (Ministry of Ecology and Environment) official answered reporters questions on 'national carbon market quota allocation plans for the steel, cement and aluminum smelting industries 2024-25', outlining
- overall approach
- ensuring continuity and stability
- plan draws from experience in the power sector and continues the core framework of free allocation based on carbon intensity
- quotas are linked to enterprises' actual output, without setting an absolute cap on emissions
- enterprises with lower emissions intensity generally have higher surplus quota ratios, creating a clear incentive for emissions reduction
- focusing on key emitters
- greenhouse gas coverage focuses on direct emissions from production processes and excludes emissions from purchased electricity and heating
- allocation plan focuses on enterprises where emissions are concentrated
- long-process steel producers using blast-furnace basic oxygen furnace routes
- cement clinker production lines
- aluminum electrolysis operations
- managing quota surpluses and deficits
- performance comparisons are based on the gap between an emitter's actual emissions intensity and the industry benchmark
- ensuring continuity and stability
- implementation work
- conducting the first quota clearance process
- 2024 quotas will now be issued to steel, cement and aluminium smelting firms
- key emitters must complete their first quota clearance within the year
- those that have already purchased 2024 or earlier quotas must carry them forward to 2025
- implementing monthly digital data credentialing
- enterprises are required to upload monthly emissions data to the national management platform
- completing 2025 quota allocation and clearance
- preliminary 2025 quotas will be issued in H1 2026
- conducting the first quota clearance process
- data quality
- improving MRV (monitoring, reporting, verification) system
- strengthening daily oversight and inspections
- enhancing emission accounting capabilities
- carbon market expansion
- MEE has begun prep work to expand to the chemical, petrochemical, aviation and paper-making industries
- drafting work is underway on allocation plans and calculating and reporting guidelines for new industries
- management, registration and trading systems have been upgraded
- future directions for quota allocation
- implementing sectoral caps first
- MEE will set total quotas and shift from intensity-based control to absolute caps
- sectors with stable emissions will be among the first to adopt total caps
- expanding paid allocation
- mixed free and paid allocations will be steadily promoted, gradually increasing the paid proportion
- a national quota reserve pool will be established
- gradually tightening quotas
- quota caps will be gradually tightened year by year, increasing scarcity and enabling carbon prices to accurately reflect mitigation costs
- implementing sectoral caps first