China Introduces Stricter Regulations on Carbon Emissions Trading to Tackle Fraud

China unveiled new regulations on Sunday aimed at addressing data fraud in carbon emissions trading, marking efforts by the world’s largest greenhouse gas emitter to expand its market into additional industrial sectors. Premier Li Qiang signed the State Council’s decree for the new regulations, set to take effect on May 1, 2024. The move is designed to reinforce the legal framework of the emissions trading scheme (ETS), currently covering approximately 5 billion metric tons of annual carbon dioxide emissions from over 2,000 power plants.

The regulations are anticipated to lead to more robust law enforcement by the Ministry of Ecology and Environment and its local counterparts. According to Shawn He, a Beijing-based lawyer specializing in carbon compliance, the strengthened regulations will come into play after May 1.

China’s national ETS, initiated in 2021 after several delays related to data accuracy concerns, enables participants to meet emission targets by purchasing allowances from other firms. By the end of 2023, trading had occurred for 442 million tons of emission allowances, amounting to nearly 25 billion yuan ($3.5 billion). However, the persistent risk of fraud prompted the introduction of stricter regulations.

The new rules will establish a supervisory system and mandate market participants to implement data quality control strategies. Additionally, they grant authorities the power to investigate and penalize companies, including third-party firms overseeing emissions that have manipulated data.

According to a recent report from the Beijing Institute of Technology, China’s ETS is expected to encompass over 3,500 companies by the end of 2025, with the inclusion of sectors such as cement and aluminum. The report also suggests the possibility of other industries, such as glass and chemicals, joining the scheme by the end of the decade.



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