The National Development and Reform Commission (NDRC), China’s central economic planning agency, issued several guidance documents relating to the upcoming national Emissions Trading System (ETS) in January this year. The documents, released in Chinese only, include: the forms that companies will be required to use to report their annual carbon emissions to NDRC;  the list of industries that will be subject to the ETS; the requirements for companies and personnel involved in the verification process; and a verification reference guide.

These guidance documents build on the preliminary rules for the ETS that NDRC released in December 2014, and represent another step in the development of the ETS, which President Xi Jinping has announced will be launched in 2017.

When launched, the Chinese ETS is expected to immediately become the largest carbon trading market in the world. China pledged, at both a joint-press conference in November last year and at the Conference of Parties in December 2015, to reduce its carbon emissions from peak level by 2030. The ETS will have major implications for all companies in covered industries. Petroleum, chemicals, construction, steel, non-ferrous metals, papermaking, electricity and aviation are cited as industries subject to the ETS.

Transparency and enforcement will be key challenges for regulators in China, but the verification guidance calls for verifiers to conduct on-site inspections, including sampling and analysis of emissions. If authorities can effectively force an emissions cap through a reliable verification system, the effects of the ETS will be far-reaching indeed.