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China: Interim Carbon Emission Measures Enacted in Guangdong and Shanghai

(Mar. 27, 2014) On January 15, 2014, the provincial government of China’s Guangdong Province promulgated the Guangdong Province Interim Measures on Carbon Emissions Management (Guangdong Emissions Measures), which took effect on March 1, 2014. (Guangdong Emissions Measures [in Chinese] (Jan. 1, 2014), Guangdong PeopIe’s Government website.) Earlier, on November 18, 2013, the municipal government of Shanghai promulgated the Shanghai Municipality Interim Measures on Carbon Emissions Management (Shanghai Emissions Measures), which took effect on November 20, 2013. (Shanghai Emissions Measures [in Chinese] (Nov. 18, 2013), Shanghai People’s Government website.)

Guangdong and Shanghai are among seven Chinese provinces and cities designated by the central government to launch carbon emissions trading scheme (ETS) piIot projects. In 2011, the National Development and Reform Commission (NDRC), a department under the State Council that manages the implementation of climate change policies in China, issued a circular to launch ETS pilots in seven provinces and cities; the other five are: Beijing, Tianjin, Chongqing, Hubei, and Shenzhen. (General Office of the NDRC Notice on Launching Carbon Emissions Rights Trading Pilot [in Chinese], Fa Gai Ban Qi Hou [2011] No. 2601 (Oct. 29, 2011).)

Prior to the issuance of the two formal measures in Guangdong and Shanghai, the provinces and cities designated to launch ETS pilots mainly based their efforts on the work plans made by their respective local governments or by their development and reform departments to implement pilot programs. (See for example, Notice of Beijing Municipal Development and Reform Commission on Launching Pilot Trading of Carbon Emissions Rights [in Chinese] (Nov. 2013); Hubei Province Carbon Emissions Rights Trading Pilot Implementing Plan [in Chinese] (Feb. 18, 2013).)

Determination of Enterprises Subject to Limits

The enterprises currently subject to emissions limits are determined on the basis of both the sector involved and the volume of emissions under the two local Measures. The Guangdong Emissions Measures cover all enterprises in industrial sectors annually emitting 10,000 metric tons of carbon dioxide and nonindustrial-sector enterprises and organizations, including hotels, restaurants, finance companies, commercial enterprises, and public entities, annually emitting 5,000 metric tons or more. Industrial enterprises whose annual emissions are over 5,000 but less than 10,000 metric tons are subject to some reporting requirements. (Guangdong Emissions Measures, art. 6.)

During the pilot period of 2012–2015, only enterprises in industrial sectors in Guangdong – including the power, cement, steel, ceramics, petroleum, textiles, ferrous metals, plastics, and paper-making sectors – and emitting 20,000 metric tons of carbon dioxide or more annuaIIy during any year between 2011 and 2014 are subject to the emissions Iimit. (Guangdong Province Implementing Plan on Carbon Emissions Rights Trading Pilot [in Chinese] (Sept. 7, 2012), Guangdong PeopIe’s Government website.)

Emissions Allowances

According to the Shanghai Emissions Measures, Shanghai Municipal Development and Reform Department formulates the work plan to allocate emissions allowances and determine the quota for each emitter, considering the historical levels of carbon emissions, industry characteristics, and their previous energy conservation and emission reduction efforts. (Shanghai Emissions Measures, arts. 7 & 8.)

The Guangdong Measures provide that the annual allowances will be distributed to enterprises on July 1 of each year, and that those allowances will be partly gratis and partly with cost, and the percentage of free allowances will be gradually reduced.” (Guangdong Emissions Measures, art. 14.)

If enterprises emit less than the allowances, they may sell the surplus amount in certified exchanges. Both the Shanghai ETS and the Guangdong ETS allow allowances left over from one year to be carried forward to the next year. (Id. art. 18; Shanghai Emissions Measures, art. 16.)

Other Measures

The Guangdong and Shanghai Emissions Measures also provide for offset mechanisms, specify competent government departments to manage the carbon emissions in their respective jurisdictions, and authorize punishments for emitters that fail to comply with the Measures.

China has said it will “gradually” establish a national carbon trading market, a proposal first announced by the overarching twelfth national five-year plan. (Twelfth National Five-Year Plan on Economic and Social Development [in Chinese] (Mar. 14, 2011), STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS GAZETTE 190 (Apr. 15, 2011).) By 2015, the country aims to “effectively control” emissions of greenhouse gases, including CO2, CH4, N2O, HFCs, PFCs, and SF6. A target of reducing carbon intensity (carbon emissions per unit of gross domestic product) by 17% by 2015, relative to 2010 levels, has also been established. (The Twelfth Five-Year Plan for Controlling Greenhouse Gas Emissions [in Chinese] (Jan. 13, 2012), Central People’s Government website.)