Reed Smith Client Alerts

The Ministry of Ecology and Environment, in its first formal publication on the subject of the Chinese emissions trading scheme since taking over the responsibility for its development from the National Development and Reform Commission, published draft ‘Interim Regulations’ in April 2019 setting out the overarching legislative framework proposed for the scheme.

Whilst this publication is very welcome and long-overdue, its sparsity highlights how much work still remains to be carried out and publicised before the scheme can be fully made operational. This client paper assesses the ‘Interim Regulations’ and considers some of the known-unknowns that follow from its publication.

Authors: Peter Zaman Katherine Yang

The Chinese National Emissions Trading Scheme (the Chinese ETS) remains a work in progress. Although the Chinese ETS was announced in late 2017, the key legislative framework necessary to support its establishment remains absent. Much of the delay can be attributed to the change of responsibility from the National Development and Reform Commission (NDRC) to the Ministry of Ecology and Environment (MEE) and the time required for the MEE to get up to speed and determine the precise scope of its mandate.

The MEE has recently published a draft regulations (for public comments) relating to the Chinese ETS. This document, titled ‘Interim Regulations on the Administration of Carbon Emissions Trading’ (the Interim Regulations), provides the overarching legislative framework for the Chinese ETS. We consider the Interim Regulations below.

How to read the Interim Regulations

Unlike legislation supporting emissions trading schemes in other countries, the Interim Regulations are notably lacking in detail. This is intentional on the part of the MEE. The Interim Regulations are best viewed as primary level legislation which will, in due course, be supplemented by secondary level rules to be published by the MEE. The Interim Regulations are, therefore, mostly about establishing the framework for the Chinese ETS and for granting authority to the MEE and its local counterparts to do what will be necessary to operationalise and administer the Chinese ETS.