China National Carbon Emissions Trading Scheme (China ETS)

ENFORCEMENT TIMELINE

July 16, 2021

Enforcement: July 16, 2021

Overview

China's National Carbon Emissions Trading Scheme (China ETS) is the central policy instrument for achieving the country's "dual carbon" goals, with online trading formally launched on July 16, 2021. It is the world's largest carbon market, launched with roughly 2,225 power-sector companies and initially based on free allocation, expanding in stages since then. With the EU's CBAM becoming fully operational in 2026, China is now rapidly extending coverage -- in a "Phase 2" expansion -- to high-emission manufacturing sectors such as steel, cement, and aluminum, making the scheme a central pillar of decarbonization for companies operating locally and for global supply chains.

Enforcement Timeline

- February 1, 2021: The "Measures for the Administration of Carbon Emissions Trading (Trial)" took effect, establishing the legal framework.

- July 16, 2021: Online trading on the National Carbon Emissions Trading Market formally began (opening price RMB 48/tonne).

- December 31, 2021: Completion of the first compliance cycle (covering 2019-2020 emissions).

- December 31, 2023: Completion of the second compliance cycle (covering 2021-2022 emissions).

- January 2024: Trading resumed in China's national Certified Emission Reduction (CCER) market.

- May 1, 2024: The Interim Regulations on the Administration of Carbon Emissions Trading took effect, formalizing the scheme in law and strengthening penalties.

- 2024-2025: Mandatory data reporting and pilot operations begin for the steel, cement, and electrolytic aluminum industries.

- 2026 (planned): Steel, cement, and electrolytic aluminum are to be fully integrated into the China ETS allowance and compliance system.

Related Regulations / Topics

China Interim Regulations on the Administration of Carbon Emissions Trading (2024)

Effective May 1, 2024, the "Interim Regulations on the Administration of Carbon Emissions Trading" elevated the legal basis of China's national carbon emissions trading market (ETS) from a ministerial rule (issued by the Ministry of Ecology and Environment) to an "administrative regulation" enacted by the State Council, China's highest administrative body. The regulation's defining feature is a substantial strengthening of penalties for falsifying or tampering with emissions data — imposing fines of up to RMB 2 million (roughly JPY 40 million) along with administrative and criminal liability, including suspension of operations, for data fraud. The aim is to bolster market credibility and align the scheme with international carbon regimes such as the EU's Carbon Border Adjustment Mechanism (CBAM).

Business Impact

Japanese companies (or their joint ventures) operating power generation or manufacturing facilities in China face direct allowance-purchase costs and strict emissions measurement, reporting, and verification (MRV) obligations as sector coverage expands, particularly into steel, cement, non-ferrous metals, and chemicals. As supply-chain decarbonization demands accelerate, stronger carbon-footprint management of Chinese-made raw materials and components is also needed. Companies should consider strategies to offset carbon costs, including purchasing credits via China's Certified Emission Reduction (CCER) program and procuring local renewable energy (green power and green certificates).