Technical Note 8 | July 2014 A Survey of the MRV Systems for China’s ETS Pilots Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPMR Technical Note 8 July 2014 This Technical Note the “report” was prepared for the PMR Secretariat by SinoCarbon Innovation at least 50 local projects Registry Online MRV Beijing ETS pilot finished its historic GHG emission 2009-2012 accounting in August 2013, after workshops and training sessions held for enterprises and verifiers. The accounting ologies and 1 The Chongqing ETS has yet to launch; the designs of the ETS has not been finalized and ination on the MRV system is not available. Therefore, Chongqing is not included in this section. 2 Legislation and guidance are drawn from local DRCs and the pilot exchanges. See lists of websites at the end of the report. PMR Technical Note 8 July 2014 3 requirements are set out in the accounting and reporting guideline for six sectors, including power, heat, cement, chemical, other industrial sector and service sector. Rules for trading The trading plat for Beijing ETS is designated to China Beijing Environmental Exchange CBEX. The trading product of CBEX is the Beijing Emission Allowance BEA. Since BEAs are allocated for the three-year pilot period at the beginning, allowances for each vintage year can be traded on the market. Controlled entity and investment organization are entitled to trade BEAs, while natural person is excluded at the moment. The BEA can be traded via open transaction or OTC. Trading status as of 2014.04.18 Volume 95,700 tons Price 52.12 RMB/ton Chongqing Province introduction Chongqing municipality is a heavily industrialized and populated city. In 2012, GDP was 1.15 trillion RMB, with primary, secondary and tertiary sectors accounting for 8.2, 53.9 and 37.9, respectively. The population in 2012 was 29.5 million. The total area is 82403 km2. Launched date of emission trading 2014.6.19 Principal legislation Regulation on Chongqing ETS management and trading Supporting regulation and guidelines 1 GHG emission accounting and reporting guideline for industrial enterprises in Chongqing 2 GHG emission verification guideline for enterprises in Chongqing 3 By-laws for GHG emission reporting and verification 4 By-laws for GHG emission permits management 5 By-laws for GHG emission trading for Chongqing United Assets and equity exchange Number of controlled companies 242 Percentage of covered emission Not specified Cap setting The Chongqing Pilot set its emission cap according to historic emission 2008-2012, where the baseline equals the sum of highest annual emission from existing installation from 2008 to 2012. Total allowances to be allocated before 2015 is determined by multiplying baseline emissions by an adjusting ratio 4.13. Allowances allocation Allowances are allocated free of charge for the pilot period and based on companies’ own reported emission level. Companies first report to the competent authority their emissions, and potential reductions, via electronic plat; then allowances are allocated in 2 scenarios 1 if reported number is higher than any vintage year, then the company receives allowance equals to average of the reported number and the highest historic emission; 2 if reported number is lower than PMR Technical Note 8 July 2014 4 any vintage year, then the company receives allowance equals to the reported number. In addition, if the sum of all enterprises’ emission exceeds the cap, then the allowances will be proportionally discounted among enterprises. Offsets 8 of emission; project types include energy saving and efficiency, clean energy and non-hydro renewable energy, carbon sink, emission reduction from energy activity, industrial processes, agriculture and waste treatment. Registry Online MRV Chongqing pilot released a MR guideline for GHG emission accounting and reporting. The guideline sets out overall ology for summing up total emission from each source and accounting for each source, including combustion of fossil fuel, industrial processes and electricity consumption. s for Industrial process emission calculation are listed in the annex, sectors including cement, lime, iron and steel, calcium carbide, magnesium semiconductor etc. Rules for trading The Chongqing Carbon Emissions Trading Center is the trading plat for Chongqing ETS pilot. Covered entities and other organization/person can take part in the carbon market. Trading may be completed via OTC and other approaches approved by the Exchange. Trading status as of 2014.07.01 Volume 150000 tons Price 29.73 RMB/ton Guangdong Province introduction Guangdong is the pioneer of China’s economic reation. The GDP reached 5.7 trillion RMB by 2012, with primary, secondary and tertiary sectors accounting for 5.0, 48.8 and 46.2. The population had grown to 105.9 million in 2012. Total area is 179800 km2. Launched date of emission trading 2013.12.19 Principal legislation Regulation on Guangdong ETS management and trading daft Supporting regulation and guidelines 1 Work Plan of Guangdong ETS for First Round of Allowance Allocation 2 GHG Permit Trading Rules of CEEX Number of controlled companies 242 Percentage of covered emission 50 Cap setting The cap of Guangdong Pilot is ulated through consideration of provincial GHG emission target, national and provincial industrial policy and economic development. The cap is set at 388 million tons, with 350 million tons available for controlled entities and 38 million tons held for reserve. PMR Technical Note 8 July 2014 5 Allowances allocation Combined heat and power generation, mining and other grinding for cement sector, petrochemical, short steel making process are based on grandfathering. Pure power generation, clinker production and cement grinding for the cement sector and long steel making processes are based on benchmarking. Offsets 10 of emission; at least 70 of local projects Registry Online MRV Guangdong ETS pilot provides for general rules on GHG accounting and reporting as well as four sector guidelines for the power, cement, iron and steel, and petrochemical sectors. Verification rules for Guangdong enterprises and workbooks for verification are available. Rules for trading The China Emission Exchange is the trading plat for Guangdong ETS pilot. Only controlled entities are allowed to trade Guangdong Emission Allowances at the moment. Trading may be completed via listed trading, unidirection bidding or OTC. Trading status as of 2014.04.18 Volume 126,000 tons Price 60.16 RMB/ton Hubei Province introduction Hubei is known for its secondary industries such as automobile manufacturing and chemical production. Its GDP had reached 2.2 trillion RMB by 2012, with primary, secondary and tertiary sectors accounting for 12.8, 50.3 and 36.9. Population rose to 57.8 million in 2012. Total area of Hubei is 187400 km2. Launched date 2014.04.04 Principal legislation Interim Measures for Hubei ETS Management Number of controlled companies 153 Percentage of covered emission 35 Cap setting The cap is ulated according to the provincial GHG emission reduction target and the economic development goals. The cap for 2014 is 324 million tons. The cap is divided into three categories, pre-allocated allowance, allowance for new entrants and governmental reserve. Allowances allocation Allowances will be allocated for free at the beginning. About 80 of the allowances will be determined by historic emission, while the other 20 will be determined by early action. Along with the data quality improvement, allocation will shift to benchmarking. Offsets 10 of allowances, restricted to local projects Registry offline MRV The guidelines for MRV haven’t been released yet. However, the historic GHG accounting, reporting and verification uations have been completed. According to the draft release, the MRV of PMR Technical Note 8 July 2014 6 the Hubei ETS consists of a general guideline for all sectors, which includes power, chemical, glass, aluminum, calcium carbide, paper, automobile, iron and steel, iron alloy, ammonia and cement. Trading status as of 2014.04.18 Volume 1,607,700 tons Price 24.08 RMB/ton Shanghai City introduction Shanghai is a municipality directly under the central government. As of 2012, the gross domestic production reached 2 trillion and the population reached 23.8 million. In the Shanghai’s economy, secondary industries accounted for 39 and the tertiary industries accounted for 60. Shanghai occupies area of 6340.5km2. Launched date of emission trading 2013.11.26 Principal legislation Trial Measures for Shanghai ETS Management Supporting regulation and guidelines 1 Guidance on GHG Accounting and Reporting for Shanghai Enterprises and 9 sectoral guidelines 2 Draft Regulation for Shanghai ETS Management 3 GHG Permit Allocation and Management Solution for Shanghai ETS during 20132015 4 GHG Permit Trading Rules of SEEX Number of controlled companies 191 Percentage of covered emission 57 Cap setting The cap is ulated according to GHG emission reduction target and economic development trends. In addition, the proportion of the emissions covered by the ETS is taking into account. However, the exact number of the cap is not published. Allowances allocation Industries other than power sector, malls, hotels, commercial buildings and railway stations will receive allowances based on grandfathering; power, airlines, airports and harbor will be based on benchmarking. Another unique feature of the Shanghai pilot is that the allowance is allocated for three years one-off at the beginning of the pilot period. Offsets 5 of allowances Registry Online MRV The Shanghai ETS covers a broad segment of the economy, including industrial and service sectors. The competent authority released a series of guidelines for GHG accounting and reporting in December 2012. There is one general guideline and nine sector guidelines for iron and steel, power, PMR Technical Note 8 July 2014 7 ferrous-metal, non-ferrous metal, paper, airlines, chemical engineering, large buildings, transportation stations in the series. Rules for trading Shanghai Environment and Energy Exchange SEEX is the trading plat for Shanghai ETS pilot. Only controlled entities are allowed to trade Shanghai Emission Allowances at the moment. Trading may be completed via listed trading or OTC. Trading status as of 2014.04.18 Volume 238,800 tons Price 66.69 RMB/ton Shenzhen City introduction Shenzhen is the gateway of southern China. Its economy, which had reached 1.30 trillion RMB by 2012, relies on manufacturing and tertiary industries, particularly IT industry. Secondary and tertiary industries accounts for 44.3 and 55.7 respectively. Population in Shenzhen had grown to 10.5 million and total area is 1953 km2. Launched date of emission trading 2013.06.18 Principal legislation Provisions of Shenzhen Special Economic Zone for ETS Regulation Supporting regulation and guidelines 1 Specification with guidance for quantification and reporting of the organization’s greenhouse gas emissions 2 Specification with guidance for verification of the organization’s greenhouse gas emissions 3 Interim Measures for Spot Trading in CEX of Shenzhen 4 Draft Interim Regulation for Shenzhen ETS Management Number of controlled companies 635; Building 197 Percentage of covered emission 54 Cap setting According to the overarching regulation, the cap is ulated through considering GHG emission reduction targets, economic development and other factors such as emission coverage and emission reduction potential. The cap for the pilot program has not been released. Allowances allocation Part of the power sector receives allowances according to historic carbon intensity while other power companies, water supplier, other industries and buildings apply benchmarking for allocation. Offsets 10 of emission Registry Online MRV Shenzhen is the first to release monitoring guideline and verification guidelines and carry out historic GHG emission accounting, covering 26 sectors including power, water supply and so on. The PMR Technical Note 8 July 2014 8 guidelines, which provide general accounting guidance for all sectors, derive from ISO 14064-1, taking into consideration of local conditions. Since large buildings are also covered by the ETS, the competent authority released a verification guideline for accounting GHG for buildings separately. Rules for trading The trading plat for Shenzhen ETS pilot is China Emissions Exchange CEX. Trading of Shenzhen Emission Allowances is open to controlled entity, investment organization and natural person. Trading may be completed by spot trading, E-bidding and block trading. Trading status as of 2014.04.18 Volume 197,328 tons Price 66.69 RMB/ton Tianjin City introduction Tianjin municipality is the economic center of the Bohai Sea rim, with GDP of 1.29 trillion RMB and population of 14.1 million as of 2012. The primary, secondary, and tertiary shares of its economic structure of Tianjin are 1.3, 51.7 and 47.0, respectively. Tianjin has population of 9.93 million and total area of 11920 km2. Launched date of emission trading 2013.12.26 Principal legislation Tianjin ETS Interim Regulation Supporting regulation and guidelines 1 GHG Permit Trading Rules of TJCX 2 Guidance for the accounting of GHG emissions for enterprises in Tianjing Number of controlled companies 114 Percentage of covered emission 60 Cap setting The cap is ulated through consideration of GHG emission reduction target, industrial policy and planning, sector coverage and also historic emission. The number has not been published. Allowances allocation Existing facilities except for power and heating are allocated with allowances through grandfathering while existing facilities of power and heating received allowances based on historic carbon intensity. Offsets 10 of emission Registry Online MRV Tianjin ETS pilot provides for the enterprises a series of guideline consists of a general guideline and 5 specific guidelines for power and heat, iron and steel, chemical, refinery and ethylene and other industrial sectors. ology and data requirements are set out in the specific guidelines while the general guideline offers guidance on monitoring plan, quality assurance etc. PMR Technical Note 8 July 2014 9 Rules for trading Tianjin Climate Exchange TJCE is the trading plat for Tianjin ETS pilot. Controlled entity, investment organization and natural person can open accounts at TJCE to trade Tianjin Emission Allowances via online spot trading, OTC or auctions. Trading status as of 2014.04.18 Volume 140000 tons Price 28.43 RMB/ton PMR Technical Note 8 July 2014 10