On June 22, 2021, Shanghai Environment and Energy Exchange released National Carbon Emission Trading Rules with specified details and requirements.
The trial carbon emissions trading in China began in November 2011, with seven markets designated as pilot markets. The market officially opened on July 16, 2021. As the National Carbon Emission Trading Organization is under establishment, Shanghai Environmental Energy Exchange (SEEE) is temporarily assigned to undertake the operation and maintenance of the whole national carbon emission trading system.
The trading rules mainly include the following contents:
1. Chinese emission allowance (CEA) transactions shall be conducted through the trading system. The methods include trading by agreement, one-way bidding or other ways conforming to the provisions. Moreover, the transfer by agreement includes listing trading by agreement and bulk trading by agreement.
2. The trading rules regulate two trading types:
(a) Listing trading by agreement: the maximum declaration amount for each listed trading by agreement sets at 100,000 metric tonnes of carbon dioxide equivalents and the fluctuation range of the transaction price sets at 10 percent according to the closing price on the previous trading day.
(b) Bulk trading by agreement: the minimum declaration amount for each bulk trading sets at 100,000 metric tonnes of carbon dioxide equivalents and the fluctuation range of the transaction price sets at 30 percent according to the closing price on the previous trading day.
3. The trading rules regulate specific transaction price, listing method, transaction period, and other details.
4. Each trading unit is allowed to apply for only one transaction account. The trading unit can apply for multiple operators and the corresponding operation rights per their business need.
The pilot markets of carbon emission trading were first established in 7 cities covering Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen. According to official statistics, as of June 2021, the total quota volume reached 480 million metric tons of carbon dioxide equivalents, with CNY 11.4 billion turnover. The total volume and potential growth of carbon emission trading market in China will be considerably tremendous.
At present, only electric power enterprises who have achieved certain emission volume shall participate in the carbon emission trading. However, China is planning to widen the scope of carbon emission trading to eight energy-intensive industries including petrochemicals, chemicals, building materials, iron, non-ferrous metals, paper-making, power and civil aviation. The operation of the trading market indicates China’s determination to achieve the carbon neutrality goal. It is also believed that the broader coverage of industries will bring remarkable growth on total trading volume.
China’s carbon emission trading market shall become more and more mature and standardized. It will be good news for foreign enterprises in new energy and green-related industries, either those who already developed in the Chinese market, or the ones that plan to enter the Chinese market.
In addition, we will also closely observe the development of China's carbon taxes and carbon tariffs, and will provide our clients with latest updates in time.
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