China Policy Journal Volume 1, Number 1, Fall 2018 | Page 33

China Policy Journal
The first piloting ETS for CO 2
emission reduction in China is Shenzhen
ETS, established in June 2013.
Subsequently, Shanghai, Beijing, Guangdong,
and Tianjin developed ETS pilots
by the end of 2013. After that, Hubei
and Chongqing developed ETS pilots
in 2014. While some similarities of the
policy design exist among pilots, such as
the use of intensity-based cap, the inclusion
of power generation sector, and the
use of free allocation, there are variations
regarding the policy design across pilots,
such as the difference in non-compliance
penalties, the difference in sectoral
coverage, and the difference in the use of
auction to complement free allowance
allocation (see Table 1).
All seven ETS pilots in China assign
intensity-based caps to participants
compared to the use of absolute caps in
other ETSs. One of the critical justifications
for the intensity-based cap is the
uncertainty of the business-as-usual
output (Quirion 2005). China’s GHG
emissions have not reached its peak
yet, and the country still keeps a rapid
economic development. Under the
circumstances, reaching an absolute
emission cap can be costly, but setting
intensity-based caps ensures flexibility
considering the emissions from future
Table 1. Policy Features of ETS Pilots in China
Program (duration)
Scope
ETS pilots (2013–present)
City-level ETS: BJ, SH, SZ, TJ, CQ
Provincial-level ETS: HB, GD
Enterprises are capped if they meet thresholds as follows.
(1) BJ: annual emission >10,000 tons CO 2
e on average during 2009–
2012 (mandatory); enterprises with annual energy consumption >
2,000 tce can voluntarily participate.
(2) SH: emission >20,000 tons CO 2
e in 2010 or 2011 for major industrial
sectors; the threshold is >10,000 tons CO 2
e for non-industrial sectors
Identifying potential
participants
(3) SZ: industrial enterprises with emission>3,000 tons CO 2
e per year,
or public buildings with area >10,000m 2 .
(4) TJ: annual emission>20,000 tons CO 2
e in any year since 2009.
(5) CQ: annual emission >10,000 tons CO 2
e in any year during
2009–2012.
(6) GD: industrial enterprises with annual emission >10,000 tons CO 2
e
on average or any year in 2010–2012; non-industrial enterprises with
emission > 5,000 tons CO 2
e
(7) HB: emission > 150,000 tons CO 2
e for major regulated sectors in
2010 or 2011
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