Clarifying Institutional Mechanisms, Regulating Trading Activities, and Punishing Illegal Acts - Interpretation of the Interim Regulations on the Administration of Carbon Emission Trading

The construction of a unified carbon emission trading market is a major institutional innovation to promote the green and low-carbon development of China's economy and society. A few days ago, Premier Li Qiang of the State Council signed an order of the State Council to promulgate the "Interim Regulations on the Administration of Carbon Emission Trading" (hereinafter referred to as the "Regulations"), which will come into force on May 1 this year.

After the implementation of the "Regulations", how will it further standardize and ensure the quality of data in the carbon emission trading market? How to strengthen the legal responsibility for restraining illegal acts? How to further improve the relevant policy supporting systems? Today, the State Council Information Office held a regular policy briefing of the State Council to introduce and interpret the relevant situation of the "Interim Regulations on the Administration of Carbon Emission Trading".

Take multiple measures to supervise and crack down on data fraud

The authenticity of carbon emission data is the key and premise of whether the policy function of the carbon emission trading market can be played and whether the market can operate healthily. The Supreme People's Court and the Supreme People's Procuratorate revised the Interpretation on Several Issues Concerning the Application of Law in the Handling of Criminal Cases of Environmental Pollution, including the falsification of greenhouse gas emission data in the scope of criminal sanctions. The Ministry of Ecology and Environment has also taken a number of measures to ensure and improve the quality of carbon market data as a political task.

For example, the Ministry of Ecology and Environment (MEE) has provided two rounds of special supervision and assistance for carbon emission reporting, and has been able to record the problems found one by one, classify them, and rectify them. Severe penalties will be imposed on illegal enterprises and their carbon emission quotas will be reduced, and technical service institutions with serious problems will be publicly exposed, so as to form a strong deterrent to fraud. At the same time, in terms of comprehensively strengthening publicity and training, the carbon emission accounting and management capabilities of key emitting enterprises and technical service institutions have been significantly improved through large-scale training. In 2023, the Ministry of Ecology and Environment organized a total of 134 relevant trainings, with about 11,000 participants, achieving full coverage of market participants.

In addition, a long-term working mechanism of "national-provincial-municipal" three-level joint review has been established, and the monthly storage of key carbon emission parameters has been creatively carried out, so as to improve the accuracy and traceability of basic data, and help to detect signs of problems in a timely manner.

The promulgation and implementation of the "Regulations" put forward new and higher requirements for data quality management, and really grew "teeth" in cracking down on carbon emission data fraud, curbing false reporting and concealment of carbon emission data, and achieved strict control, serious supervision and severe punishment.

Among them, the "Regulations" clarify the prohibitions and penalties for relevant institutions and personnel, continue to reduce the space for data fraud through supporting systems and regulations, and ensure that data cannot be tampered with by building and improving the management platform of the national carbon emission trading market, and using blockchain and digital technology. Through the working mode of annual verification and daily supervision, we will continue to strengthen data quality audits.

At the same time, the "Regulations" also clarify the regulatory responsibilities of relevant departments, "zero tolerance" for carbon emission data fraud, severe penalties, and public exposure of violations of laws and regulations.

Clarify illegal acts and strengthen legal responsibility

The promulgation and implementation of the Regulations provide a legal basis for the operation and management of the national carbon emission trading market.

Among them, in terms of adhering to the whole process management, the "Regulations" have achieved full coverage of the elements and main links that constitute carbon emission trading, including registration institutions, trading institutions, greenhouse gas types and industry scopes, trading entities, trading methods, determination of key emitting units, allocation of carbon emission allowances, as well as the preparation and verification of greenhouse gas emission reports, the settlement of carbon emission allowances and market transactions, etc., leaving no blanks and blind spots.

Zhang Yaobo, director of the Fourth Bureau of Legislation of the Ministry of Justice, said that legal responsibility is an important guarantee for the effective implementation of a piece of legislation, and only when legal responsibility is perfected can the system grow "teeth".

Because of this, the "Regulations" have gone all out to improve the relevant content of legal liability, and strive to enhance the pertinence and effectiveness, so as to effectively deter illegal acts.

For example, the "Regulations" stipulate a variety of legal sanctions for different illegal acts in carbon emission trading and related activities. Among them, legal sanctions include warnings, reduction of carbon emission quotas, confiscation of illegal gains, fines, cancellation of inspection and testing qualifications, prohibition of engaging in related businesses, and orders to suspend production for rectification. Among them, there are both admonition and property penalties, qualification penalties and behavioral penalties, and both civil liability, administrative liability, and criminal liability.

In addition, Zhang Yaobo said that when the "Regulations" were formulated, the focus was on building a framework system for the management of carbon emission trading, and maintaining the necessary flexibility. On the one hand, the Regulations provide basic compliance for the operation of the carbon market, ensure standardization and orderliness, and at the same time leave enough space for future exploration and development in the design of relevant systems.

The market is stable and improving, and the products are gradually enriched

In the two and a half years since the launch of the national mandatory carbon market, the overall operation has been stable, and the system and norms have been improved day by day. The data shows that the second compliance cycle of the national carbon emission trading market has significantly improved its market activity compared with the first compliance cycle. By the end of last year, the cumulative trading volume of the national carbon emission trading market reached 440 million tons, with a turnover of about 24.9 billion yuan. The second compliance cycle saw a 19% increase in volume and an 89% increase in turnover over the first compliance cycle.

On this basis, the "Regulations" are based on the current situation of China's economic and social development, and make corresponding provisions on the current difficult problems in the carbon market.

For example, the "Regulations" make it clear that the quota allocation will gradually implement a combination of free allocation and paid allocation in accordance with the relevant requirements of the state. At present, China's carbon emission trading market quota allocation method is free of charge, most of the mature carbon markets in the world have carried out the practice of combining free and paid allocation, timely introduction of paid allocation and gradually increase the proportion of paid allocation, is conducive to the control of total carbon emissions, so that the carbon price more truly reflects the cost of carbon emission reduction, better play the role of the market.

In addition, the "Regulations" also provide for the enrichment of trading entities and products. At present, the national carbon emission trading market only controls carbon dioxide, a greenhouse gas, and the scope of the industry is only the power generation industry. The Regulations stipulate that the types of greenhouse gases and the scope of industries covered by carbon emission trading shall be proposed by the competent department of ecology and environment of the State Council in conjunction with relevant departments in accordance with the national greenhouse gas emission control target study, and shall be implemented after approval by the State Council.

In the future, the Ministry of Ecology and Environment will give priority to key industries with large carbon emissions, serious overcapacity, good synergistic effect on pollution and carbon reduction, and good data quality foundation based on factors such as the industry's carbon emissions, data quality basis, pollution and carbon reduction synergy, and high-quality development of the industry, taking into account the stage and situation of China's economic and social development, the overall requirements of the state to control greenhouse gas emissions, and comprehensively consider factors such as the industry's carbon emissions, data quality basis, pollution and carbon reduction synergy, and high-quality development of the industry. At the same time, we will optimize the quota allocation method, continuously enrich the trading varieties, trading entities and trading methods, and stimulate the vitality of the market.