China tightens rules on polluters before carbon market expansion

CHINA toughened rules for industrial polluters participating in its national carbon market, including larger fines for entities found to be falsifying data on emissions reductions.

The regulations, signed off on Sunday (Feb 4) by Premier Li Qiang and to come into force from May, give greater powers to the Ministry of Ecology and Environment as China prepares to extend the system, which currently covers about 2,200 utilities that are responsible for roughly 4.5 billion tonnes a year of greenhouse gas emissions.

Participants found to have withheld or misreported emissions data face fines of as much as two million yuan (S$378,386) and deductions from their future allocation of pollution allowances, according to the amended market regulations.

The changes also include measures aimed at reducing the supply of free allowances as the market, which has faced criticism for being too lenient, aims to do more to compel large emitters to cut emissions.

Chinese environment officials are continuing to study plans to expand the market to additional industries – including aluminium and cement production – from this year. The intention is to cover about 70 per cent of the nation’s emissions by 2030, under efforts to meet President Xi Jinping’s pledge for China to hit net zero by 2060.

Bureaucrats have been considering other tools including extending trading in the compliance market to financial institutions, launching an auction mechanism, and the restart of voluntary carbon offsets, according to Xi Liang, a professor of sustainable transitions in construction and infrastructure at University College London.

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Emission allowance prices are expected to rise this year as tighter regulations help to limit a surplus. Allowances traded at 74.53 yuan a tonne on Friday. BLOOMBERG