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What’s Included:
o An Update on National Emission Trading System
o Corporate Disclosures Mandates - Policy Updates
o Green Finance Information Disclosure Policy Updates in China
o Looking Forward
Introduction
Starting from the 12th Five-year Plan period (2011-2015), China has incorporated reducing carbon intensity into the outline of the plans for national economic and social development as binding targets and defined key tasks, priority areas, and major projects. China's Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035 sets a binding target of slashing carbon intensity by 18% from 2020 to 2025. Aiming to lower its carbon intensity by over 65% by 2030 from the 2005 level and to increase the share of non-fossil fuels in primary energy consumption to around 25 percent by 2030… All provinces, autonomous regions, and municipalities directly under the central government (PARMs) have taken on the response to climate change as an important part of the 14th Five-year Plan and set themselves specific targets and tasks. (The State Council Information Office of the People's Republic of China, Link)
According to the white paper released by the China Central Depository & Clearing Co., Ltd. (CCDC) and the International Capital Market Association (ICMA), China’s ESG-related policies demonstrate the following characteristics: China’s ESG-related policies are mainly composed of departmental regulations and industry self-discipline rules. China’s ESG-related policies started late but developed rapidly. ESG-related policies for business entities and the financial sector go hand in hand and develop in a coordinated manner. The current Enterprise ESG Disclosure status is as followed: (from CCDC)
Statistics show that the proportion of companies making ESG disclosures has increased from 16% in 2018 to 19% in 2021, and companies’ willingness to disclose actively has increased. The disclosure rate of “carbon emission” as one of the key reporting topics has increased from 7.09% in 2018 to 10.45% in 2021.
According to Wind’s research, as of November 2022, a total of 375 A-share listed companies disclosed their total carbon emissions for the financial year of 2021. In terms of industries, the self-disclosure rate of companies in the financial industry is generally higher compared to other industries, with insurance companies reaching 83% of disclosure rate, while the banking industry and diversified financial industry reached around 35% disclosure rate. This is due to the relatively strict regulatory requirements faced by the financial industry and the high awareness of industry leadership. Industries like consumer services, media and food, and retail of major supplies had the lowest disclosure rates, indicating that regulatory requirements in the consumer industry need to be strengthened and enterprises' awareness of self-disclosure still needs to be improved.
The increasing demands for greenhouse gas emission accounting in China have been largely attributable to national green finance policies to achieve the government’s “dual-carbon” goals of reaching carbon peaking by 2030 and carbon neutrality by 2060. Since the last update in 2021, GC Insights has been researching the field of China’s evolving policy frameworks to measure climate impact and climate actions to combat climate change, we will be introducing such changes in the following content.
An Update on National Emission Trading System
On February 1, 2021, China’s Interim Rules for Carbon Emissions Trading Management came into effect. Marking the start of spot transactions within the quotas of the national carbon market. The rules specify that the Ministry of Ecology and Environment (MEE) shall organize a registration system and trading system for domestic carbon emissions, including agencies for registration and trade, in accordance with national regulations. The nationwide carbon market online trading system has been launched in June 2021, with a current trading price in China Emission Allowance (CEA) price of ¥55.00 yuan per ton of carbon emissions in April 2023. The CEA price is relatively stable due to a lack of liquidity and participants as the power sector remains the only one included sector for carbon trading and voluntary carbon market, China Certified Emission Reductions (CCERs) system is still underprepared for more market participation, and this situation is about to change in the near future.
Energy Transition: Lower national average emission factors for the national power grid as a higher proportion of renewable energy generation in China. In February 2023, the Ministry of Ecology and Environment (MEE) released the Guidelines for Greenhouse Gas Emission Reports of Enterprises in the Power Generation Industry from 2023 to 2025. In 2022, the average emission factor of the national power grid was 0.5703 tCO2/MWh.
(National emission factor for purchased electricity and Annual Percentage of Renewable Energy / Total Electricity Generation, data from MEE and NEA)
Not sure how to stay current and curve your strategies towards a lower carbon economy as policy scrutiny expands? Read more about "A practical guide to neutrality for corporates" here
In the meantime, contact GC Insights to learn more about how to improve your carbon accounting and ESG disclosures, increase your climate impact visibility and manage your climate risks and opportunities. We are piloting our all-new ESG Reporting SaaS Platform – ESG Connector and feel free to contact us for more fundamental carbon accounting solutions and guidance.
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