Compliance Factsheets

State and Trends of Carbon Pricing Dashboard

The State and Trends of Carbon Pricing Dashboard is an interactive online tool aimed at policymakers, businesses, and researchers. It provides the latest information on existing and emerging direct carbon pricing initiatives around the world.

Name of Instrument

China national ETS
ETS
Implemented
China
Free allocation (Intensity-based)
None
CO2
Diesel; Other oil products; Gasoline; Kerosene; LPG; Natural gas; Waste as fuel; Coal
Point Source
Yes, with quantitative limit

Covered Sectors

  • Covered
  • In principle
  • Electricity and heat
  • Industry

Description

China’s national ETS began operating in 2021. It regulates more than 2,000 companies from the power sector with annual emissions of more than 26,000 tCO2, including combined heat and power, as well as captive power plants in other sectors. Covered entities must surrender allowances for all their covered emissions, and allocation is based on intensity, with allowances freely allocated using benchmarks and based on actual production levels. Compliance obligations are currently limited and vary between different types of power generation. The system’s coverage will expand to other sectors over time. The national ETS builds on the experience of pilot carbon markets implemented in eight regions. These pilots continue to operate in parallel with the national ETS, covering sectors and entities not included in the national system. As the national system expands, entities covered by regional systems are expected to be integrated into it.

Recent Developments

The “Interim Regulations for the Management of Carbon Emissions Trading” (Interim Regulations), took effect from May 2024. It is intended to further enhance enforcement measures and non-compliance penalties for different stakeholders. In March 2025, the Ministry of Ecology and Environment (MEE) published “ The work plan of China National ETS covering the iron and steel, cement and aluminum industries”. It proposes expanding the ETS to also cover GHG Emissions from iron and steel, cement, and aluminum industries, over two phases. Phase 1 (2024 to 2026) aims to familiarize companies in these sectors with the national ETS and enhance emissions data quality. Companies will start to surrender allowances for emissions of 2024 by December 2025. Phase 2 (starting in 2027) aims to tighten and further improve the functioning of the system. This scope expansion, as being approved, brings an additional 1,500 companies into the Chinese national ETS, increasing the system’s emissions coverage by 3 billion tCO2e. Further details, including on allowance allocation methods, are expected to be published in the future. In October 2024, the MEE released the allocation plan and compliance work plan for the power sector for 2023 and 2024. The allocation plan updates benchmarks and excludes indirect emissions. It also sets a rule on allowance carryover. According to this plan, the compliance is shifting from a two-years cycle to a one-year cycle.

Coverage

The ETS initially only applies to CO2 emissions from the power sector, including combined heat and power and captive power plants from other sectors.

Pricing and allocation approaches

Baselines (Intensity-based), Auctioning

Compliance Approaches

Biennial

Relation to other compliance CPIs

Under the national ETS work plan, the eight pilot ETSs operating in China will gradually be integrated into the national ETS.

Covered Emissions

Price range:
in 2024

Indicates instruments with multiple price levels. Only the main rate is shown for these instruments. Data last updated on 1 April 2023

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