new carbon market rules tighten the screws on polluters

context: The PRC carbon market is the largest in the world, covering some 40 percent of domestic, and 10 percent of global emissions. Yet, as it readies to expand beyond the power generation sector, data quality issues are still a major concern. 

Li Qiang 李强 PRC premier signed an order promulgating ‘carbon emissions trading management temporary regulations’ on 25 January 2024, to come into effect from 1 May 2024. Officials from MoJ (Ministry of Justice) and MEE (Ministry of Ecology and Environment) outlined the background and aims of the document in a recent press conference. 

According to officials, the market has been operating relatively smoothly since its launch in July 2021 

  • as of the end of 2023 
    • the national carbon market included 2,257 power generation companies 
    • total transaction volume was approximately 440 million tonnes

However, shortcomings in the system have become apparent. Notably, legislation has been of a low level and lacked authority, officials stated. This has made it difficult to regulate trading activity, ensure data quality and punish illegal acts. 

The new regulations will form the basic institutional framework for the management of carbon emissions trading, officials noted, stipulating 

  • KEEs (key emitting entities) that fail to pay off CEAs (carbon emission allowances) will be fined between 5-10 times the average market transaction price over one month 
  • measures to address data fraud 
    • MEE will establish a market management platform to strengthen supervision of trading activities and share information between relevant departments 
    • KEEs will be required to formulate emissions data quality control plans 
    • environmental authorities can conduct on-site inspections of KEEs and technical service agencies at will
    • penalties for those who commit fraud will be increased, and a credit record system established 
  • no more new local carbon markets 
    • after the regulations come into effect, no new local carbon emissions trading markets will be established 
    • KEEs will not participate in local trading markets for the same greenhouse gas type and industry