The Ministry of Ecology and Environment released the Work Plan on National Emissions Trading Scheme Covers Cement, Steel and Aluminum Industries, based on a draft version released last September.    

• The action plan adds the cement, steel, and electrolytic aluminum industries to the national emissions trading scheme (ETS). Before this, the national ETS only covered the power generation industry.  

• The action plan sets two phases named as the initiation phase (2024-2026) and the deepening and improvement phase (2027 onwards).

(The EU's Carbon Border Adjustment Mechanism (CBAM) is set to take effect in 2026. The expansion of China's ETS to include these industries may provide Chinese companies with a stronger basis for dialogue with the EU when CBAM is implemented.) 

Compared to the draft, the plan has made the following key improvements:

• The new plan adds the provision that “2024 quota will match the actual verified carbon emissions of each industry” while removes the reference to “free allocation of quotas.” 

  (This means that, although key enterprises in these three industries must meet their first compliance requirements by the end of 2025, they will not incur any explicit costs, as carbon emissions quotas will align with actual emissions. However, paid allocation of quotas may be gradually introduced in the future.)

• The new plan also emphasizes data authenticity and strengthens information disclosure. (This will also help Chinese companies better align with the EU’s CBAM.) 

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关于印发《全国碳排放权交易市场覆盖钢铁、水泥、铝冶炼行业工作方案》的通知