Key issues in designing China’s national carbon emissions trading system

Abstract

The design of China's national carbon emissions trading system (ETS) has been shaped by major considerations including the significant disparities that exist between the different regions of the country, concerns about possible impacts of the ETS on the economy, the continuously evolving policy environment, and the need to divide responsibilities appropriately among relevant authorities. To address these issues and other policy constraints while adhering to the principles of high efficiency and effectiveness within a national system of unified rules, China created a legal framework with unique rules for the coverage and scope of emissions trading, allocations, cap setting, monitoring, reporting and verification, compliance, and division of responsibilities. The system was designed to maintain unified rules across the entire system while also providing flexibility in aspects ranging from coverage and scope, allocation and cap setting to compliance. This design will not only facilitate the formulation of a State Council regulation providing the necessary strong legal foundation for the ETS but will also avoid the frequent changes of regulations that often occur in an evolving policy environment.