The government plan released in December is hazy about the exact timeline for the rollout of the ETS. Instead, it sets out the next few stages of implementation and makes clear that any and all parts of this plan could be adjusted.
In the first stage, over the next year or so, China will focus on the basic infrastructure of the scheme: setting up emissions monitoring, reporting and verification systems, alongside the administrative aspects of the trading system. Companies will be required to monitor and report their emissions to the NDRC and other relevant local regulators.
Power companies will start to receive ETS allowances in this time and the legal basis for the ETS is also likely to be strengthened, according to Energy Foundation China.
The second step will be a year-long “simulated” trial of the market, the plan says, expected to start in 2019. This will see free credits allocated to companies with mock trading, but with no money changing hands. It aims to test and develop the reliability, market risks and management of the trading platform, the plan says.
Extract from the NDRC’s, “Program for the establishment of a national carbon emissions trading market (power generation industry)”. Note that this is from the unofficial translation published by crowdsourced translation website China Energy Portal.
Only after these two year-long steps will trading for money begin in the power sector. Since the plan says the two earlier stages will take around a year each, this is unlikely to happen until at least 2020, although China has set no concrete date.
It is worth noting that 2020 will be a key year for China, when it is set to release both its next Five-Year Plan and its updated Paris pledge.
If the power-only carbon market reaches “stable operation”, the plan says this is to be followed by a gradual expansion of the market to include other sectors, as well as other tradeable products, such as emissions offsets. However, there is no timeline for either of these.