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Case Study
Beijing’s Pilot Emission Trading System
January, 2021
Lead author: Hui Qian, ICLEI East Asia Secretariat
Editors: Yu-Ting Chang, Yun (Yvonne) Yang & Ge Liu, ICLEI East Asia Secretariat
Contributor: Fen Sun (The Climate Change Research Center of the Beijing Municipal Ecology and
Environment Bureau)
Photo Credit: Voice of Beijing Environment
C limate Change is one of the most alarming is-
sues the world is facing in this era. To combat
this crisis, a market mechanism for carbon emis-
According to the explanation pro-
sion trading is widely-used globally. According to
vided by the Center for Climate
the latest Emissions Trading Worldwide Status
and Energy Solutions in 2011, emis-
Report released by the International Carbon Ac-
sions trading (also known as cap and
tion Partnership, 21 Emission Trading Systems of
trade) is a market-based approach
different scales have been implemented in 29
to reducing the emissions of pol-
jurisdictions around the world by April 2020, to-
lutants by providing economic in-
gether covering 9% of global GHG emissions and
centives. A central authority allo-
one-sixth of the global population.1
cates permits that allow a specific
amount of pollutant discharge over
As one of the seven pilots in China, Beijing
a set time period to entities; where-
launched its Emission Trading System (ETS) in
as polluters are obliged to manage
November 2013, with the support of its policy
the amount of pollution within the
module “1+1+N”.2 Moving into its seventh year
given emission quotas. Entities that
of operation, the Beijing ETS now has over 900
would like to increase their emis-
liable entities, covering about 45% of the juris-
sions must purchase additional quo-
diction’s total emissions.3 29.07 million tons of
tas from those willing to sell.
emissions allowances have been traded on the
Beijing ETS, accounting for a total value of CNY
1.049 billion (USD146,860 million).4
1. ICAP, 2020b
2. The framework, regulations and market data of the Beijing ETS presented in this case study were mainly referenced from the
Annual Reports of Beijing Carbon Market 2014-2018 jointly published by China Beijing Environment Exchange (CBEEX) and the
Beijing Green Finance Association (BETA).
3. ICAP, 2020a
4. CBEEX & BETA, 2019
1
Key Take-aways Fixed sector benchmarking can incentivize
firms to seek for energy-saving solutions.
China’s Former Representative to UNFCCC ne- By promoting better performances on emis-
gotiations Xie Zhenhua announced in 2018 that, sions intensity and energy efficiency, the
thanks to the carbon trading scheme, China has Beijing ETS has enabled a range of co-ben-
reached its 2020 carbon emission target three efits of climate change mitigation and envi-
years ahead of schedule.5 This case study sum- ronmental protection.
marizes a few key points regarding the experi-
ence of the Beijing ETS: Emissions Trading Market in China
Policy framework design is the foundation of As one of the largest emitters in the world, China
a stable carbon market. Through its “1+1+N” is on its way towards reduced carbon emissions
policy module, over 30 supporting documents without hindering economic development. In its
have been released by Beijing to supplement Intended Nationally Determined Contributions
its emission trading system. Report – Enhanced Actions on Climate Change
A broad and encompassing definition of – submitted to the United Framework Conven-
stakeholders – such as the inclusion of eligi- tion on Climate Change (UNFCCC) in 2015, Chi-
ble individuals and credible entities – could na pledged to put a peak on its growing carbon
help to grow liquidity and improve market dioxide (CO2) emissions by 2030 or earlier, and
efficiency. lower CO2 emissions per unit of GDP by 60%- 65%
An MRV framework that includes third-par- from 2005 levels also by 2030.6
ty verifications and spotchecks by govern-
ment-assigned experts could help to ensure Through the “Decision of the State Council on
the accuracy and authenticity of emission Accelerating the Cultivation and Development
data. of Strategic Emerging Industry” released in Oc-
Well-designed penalties and enforcement tober 2010, the Government of China official-
approaches for noncompliance could enable ly announced its intention to develop a carbon
the market to function smoothly and effec- market scheme, and later reiterated the deter-
tively. mination of accelerating low carbon application
Prioritizing sectors with the highest emis- and research, as well as establishing a domestic
sions intensity could help to maximize the carbon emission trading market in the country’s
trading system’s impacts – the Beijing ETS 12th Five-Year Plan for Economic and Social De-
covers about 45% of the city’s total emis- velopment (2011-2015).
sions.
Emissions inventories with the best availa- With the objective to gradually establish a na-
ble activity and statistical data can provide tional carbon trading market and achieving the
a robust foundation for cap-setting, which country’s goal of controlling GHG emissions, in
should be considered along with the jurisdic- late 2011, China’s National Development and Re-
tion’s business-as-usual emission scenario, form Commission approved 2 provinces (Guang-
as well as its emission reduction targets. dong and Hubei) and 5 cities (Beijing, Chongqing,
Methods of allowance allocation vary be- Shanghai, Shenzhen, and Tianjin) as ETS pilots,
tween sectors, and by providing flexibility with Shenzhen being the first pilot to launch in
on time of receiving allocations to regulated June 2013. The 7 local governments together ac-
entities, it helps to avoid excessive surplus count for around 25% of China’s annual GDP and
allowances in the market. represent the wide variety of economic develop-
ment conditions within the country.7
5. UNFCCC, 2018
6. The full report is available at https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/China%20First/China%27s%20
First%20NDC%20Submission.pdf
7. Luo, 2017
2
The main purposes of establishing ETSs in China the municipal government to take management
are to:8 measures during the pilot operation period.
1) contribute to effective control and reduc-
tion of carbon emissions; The second “1” refers to the policy document
2) achieve green and low carbon development; “Interim Measures for the Management of Emis-
3) mitigate haze pollution and emission of oth- sions Trading in Beijing” published by the Gov-
er pollutants for better air quality; and to ernment of Beijing Municipality on 28 May 2014,
4) develop new financial mechanisms for the aiming to (a) verify the principal instructions
market. of the city’s entire carbon trading process; (b)
clarify the rights and duties of each governmen-
As one of the ETS pilots and the capital city of tal department; and to (c) provide operational
China, the development of the Beijing ETS could supervision to the market.
be a significant component in the country’s mul-
ti-level carbon markets.9 Finally, the “N” refers to all supporting laws and
regulations set up to elaborate the measures
The first official carbon trading scheme mentioned above. By 2019, over 30 policy and
in China was launched 19 December technical support documents, as well as guide-
2017, with a sole focus on the country’s lines on trading, allowance allocation, verifi-
power generation industry. At the time, cation, penalty, trans-region cooperation, and
the National Development and Reform emissions intensity have been released to com-
Commission of China has made it clear plement the policy framework, establishment
that the mechanism was only the be- and operation of the Beijing ETS.
ginning of establishing carbon trading
mechanisms in the country. The reason Initiatives and Platform Establishment
to prioritize the power generation sec- Beijing launched its ETS in November 2013,
tor was that it is the largest GHG con- with its Development and Reform Commission
tributor in China. In fact, with more authorized to lead the coordination and super-
than 1,700 power companies and 3 bil- vision of its operation, along with the support
lion tons of GHG emissions in total regu- of the bureaus of Statistics, Finance, Landscape
lated by the scheme, China now has the and Forestry, and the Commission of Economy
largest carbon market in the world.15 and Information Technology. However, follow-
ing the governance structural reform in China,
from 2019 onwards, the leading supervision role
Legal framework and Policies of the Beijing ETS has been shifted to the Bei-
behind the Beijing ETS jing Municipal Ecology and Environment Bureau
(BEE).
Legislations and Regulations
The Beijing ETS is supported by a policy mecha- Appointed as the official trading platform of the
nism called “1+1+N”. The first “1” refers to the Beijing pilot ETS, China Beijing Environmental
policy document “Decision on Implementing CO2 Exchange (CBEEX) was given the mandate to pro-
ETS in Beijing” released by the Standing Com- vide a just, fair and transparent platform where
mittee of Beijing Municipal People’s Congress on participants’ rights and trading discipline are
27 December 2013. The document has the high- guaranteed. The main responsibility of CBEEX
est legal effect among all legislations related to is to ensure the stability of the allowance, the
the operation of the Beijing ETS, and was de- capital and high liquidity of the market. It is also
signed to (a) formulate an institutional struc- required to issue real-time transaction vouchers
ture and penalties;(b) define the roles of mul- to prove trades between entities, keep transac-
ti-stakeholders by their responsibilities and the tion records and regularly publicize transaction
rights they are entitled to; and to (c) authorize information with reasonable service charging.
8. CBEEX & BETA, 2018; “Purposes of Carbon Trading”, 2019
9. CBEEX & BETA, 2019 10. ICAP, 2020a; GIZ, 2018
3
Mechanism of the Beijing ETS the highest energy efficiency performance in
the sector. This creates an incentive for covered
Coverage and Allowance Allocation entities to seek for energy-efficiency upgrades
The list of regulated entities and the alloca- and/or renovations of technologies and supplies
tion of allowances have gone through stages of in the long term.
modification as the Beijing ETS develops. Before
2019, the Beijing Development and Reform Com- Reflecting the change of policies, the develop-
mission had been taking the lead in distributing ment of the Beijing ETS can be divided into two
the allowances following the “moderately tight” phases summarized as follows:
principle by providing regulated entities with
flexibility regarding the timing of receiving allo- Phase I. 2013 - 2015
cations, which helps avoiding excessive surplus During the initial period of the Beijing ETS, en-
allowances in the market. In addition, the city tities identified to be regulated in Beijing were
can set aside up to 5% of its total allowances for mainly stationary sources, including heating
regular and irregular auctions to ensure market sector, electricity generators, cement produc-
stability. tion, petroleum chemicals production, as well
as other manufacturing and service industries.
Allocations in the Beijing ETS are mostly free, Any company or industry with over 10,000 tCO2/
based on historical emissions – referred to as year emitted directly or indirectly are enlisted
grandparenting or grandfathering – or on fixed as a regulated entity under the Beijing ETS. Al-
sector benchmarks.10 Allowances for existing lowances are distributed based on emissions or
firms in the service and other industries are emissions intensity in the baseline years. Start-
grandparented based on individual entity’s his- ing from 2014, individuals meeting the stated
torical emissions or emission intensity in the requirements are also eligible to register as
baseline years. market trading entities in the ETS and partici-
pate in trading.
New entrants and the energy sector, on the oth-
er hand, are allocated with allowances calcu- Phase II. 2016 – present
lated using the benchmarking approach. Rather Since 2016, the Beijing ETS expanded to cover
than directly referencing to individual entity’s all stationary and mobile sources in the jurisdic-
historical emissions, the level of assistance each tion. The public transport supply and industry
entity can receive is determined by the bench- was therefore also included in this phase. Indus-
mark emissions intensity of technologies with trial and non-industrial companies and entities
Figure 1. Trading Entities in the Beijing ETS
10. ICAP, 2020a; GIZ, 2018
4
in the covered sectors with 5,000 tCO2/year MRV and Enforcement Approach
emitted directly or indirectly are enlisted as a To supervise market operation of the carbon
regulated entity. As a result of this expansion, market, Beijing established an MRV – Monitor-
the number of liable entities went up to 947 in ing, Reporting and Verification – system for its
the same year. ETS. The mechanism includes issuing guidelines
on emission accounting and reporting, market
In addition, all legal entities with energy con- supervision, verification process and administra-
sumption over 2,000 tons of standard coal equiv- tive measures for third-party verifiers. In 2017,
alent (tce) are obliged to report their annual 35 third-party verification institutions with 467
emissions, despite not being entitled to free inspectors reported engagements in the process,
allocation. As of 2019, 634companies have man- covering all six targeted industries.
datory reporting obligation but no surrender ob-
ligations.11 In addition, spot checks on the submitted verifi-
cation reports are also conducted by independ-
Moreover, from 2017 onwards, all institutions ent experts or other verifiers appointed by the
and entities in Beijing can register in the ETS as government, as a means to ensure that the qual-
non-regulated entities and participate in trading ity of the reports and that the third-party veri-
as long as they conform to the stated require- fiers are retaining impartiality while conducting
ments. the verification. Figure 2 illustrates the general
process of the Beijing ETS MRV cycle.
Following the expansion, the participants of
the Beijing ETS now includes regulated entities, Together with the MRV system, the enforcement
mandatory reporting entities, as well as individ- of penalties for non-compliance is also support-
uals and other institutions, entities and actors. ing the effective operation of the carbon mar-
Figure 1 presents a summary of the standards ket in Beijing. Misreporting or failing to pro-
and requirements of different trading entities in vide emissions and relevant data,or verification
the Beijing ETS. reports are subject to penalties of up to CNY
50,000 (USD 70,000).12
Figure 2. The Beijing ETS MRV Cycle
11. BMEEB, 2020
12. This case study adopts the currency exchange rate on 10 June 2020 with CNY 1 = USD 0.14, provided by Exchange Rates UK.
Retrieved from https://www.exchangerates.org.uk/USD-CNY-10_06_2020-exchange-rate-history.html
5
Entities emitting in excess of their allowances the jurisdiction is limited to 2.5%.Project-based
will face a fine per unit of 3-5 times the mar- carbon offsets are issued in units of tCO2e.
ket average allowance price in the previous six
months. In addition, the names of non-com- Trading of the allowances can be proceed-
pliant entities and third-party verifiers can be ed through online trading or over-the-counter
published and kept as a record in the National transactions. Online emissions trading orders
Enterprise Credit Information Publicity System, can be made in three types:13
which could have impacts on their future capi- 1) All-or-none (AON) orders: exchanges be-
tal financing. tween a single buyer and a single seller that
must be executed in its entirety, or not exe-
Trading Schemes cuted at all.
All regulated entities are required to register 2) Sweep-to-fill orders: market orders that are
in the trading platform managed by CBEEX, and split into numerous parts and filled by taking
can engage in emissions trading with the carbon all liquidity at the best possible price.
offset credits allocated to their accounts. 3) Limit orders: exchanges that can only be
executed at a specified - or better - price
Currently, the Beijing ETS allows for the use where partial fills are allowed, and may in-
of two emissions trading schemes, namely the volve multiple parties.
Beijing Emissions Allowance (BEA) and pro-
ject-based offsets (Figure 3). BEA refers to the Over-the-counter (OTC) trades are executed
emission allowances allocated to each regulated directly between two parties based on signed
entity by the jurisdiction. Allowances are issued agreements, and transaction of emissions units
in units of tCO2. should be carried out at CBEEX. When connect-
ed transactions are conducted between two or
Project-based carbon offset units, on the oth- more trading entities, or a single transaction of
er hand, can be generated via Chinese Certified allowance exceeding 10,000 tCO2, the transac-
Emission Reductions (CCER), energy conser- tions are obliged to be proceeded via OCT trad-
vation projects, forestry carbon sink projects, ing.
and motor vehicles voluntary emission-reduc-
tion programs validated by the National Devel- A price warning system is also established as a
opment and Reform Commission. However, the part of the market stability mechanism, where
use of offset credits generated from CCER in the trading entities can auction extra allowances if
Beijing ETS is limited to 5% of the annual allo- the weighted average price is above CNY 150
cation for each regulated entity, and the use of (USD 21.00) for 10 consecutive trading days,
CCER credits generated from projects outside and buy-back allowances from the market if the
price falls below CNY 20 (USD 2.80).
Figure 3. Structure of the Beijing ETS
13. CBEEX & BETA, 2019
6
Achievements of more than CNY 144 million (USD 20.16 mil-
Since the carbon market officially launched in lion). Considering the emission units generated
Beijing on 28 November 2013, trading activities via CCER may have different trading conditions
have been steadily increasing both in terms of and applicability, the majority of their trad-
volume and value under BEA (Figure 4). As of 31 ing took place through OCT transactions. Wind
December 2018, 29.07 million tons of emissions power, biomass energy, biogas utilization, solar
allowances have been traded on the Beijing ETS, CCER projects.
which accounts for a total value of CNY 1.049
billion (USD146,860 million), with online trad- Similarly, trades regarding the emission units
ing and OTC transactions representing around generated from forestry carbon sink projects
36% and 64% of the total volume respectively. also vary depending on the number of projects
By the end of 2018, over 960 entities in Beijing validated. By the end of 2018, forest projects in
have registered themselves in the carbon mar- Beijing have been issued with offsets including
ket with a total of 360 entities and individuals the Shunyi Forestry Carbon Sequestration Pro-
having participated in actual trading activities. ject (Phase 1),the Chengde City Fengning Coun-
Data used in this section came from the Annual ty Qiansongba Forestry Carbon Sequestration
Reports of Beijing Carbon Market 2014-2018 by Project (Phase 1), the Beijing Fangshan District
CBEEX and BETA. and Badaling Carbon Sequestration Afforesta-
tion Project, and the Saihanba Mechanical For-
Trades regarding the emission units generated est Farm Afforestation and Carbon Sequestra-
through CCER, on the other hand, vary depend- tion Project. According to the Annual Reports of
ing on the numbers of projects validated. Be- Beijing Carbon Market released jointly released
tween 2015 and 2018, a total of 22,141,182 tons by CBEEX and BETA, a total of 164,826 tCO2e
CCERs were traded in Beijing, with a total value were traded in Beijing between 2014 and 2018.
Figure 4. 2014-2019 Beijing Carbon Market Performance - BEA
7Table 1. 2015-2018 Beijing Carbon Market Performance – CCER
Online Trading OCT Trading Total Trading
Volume (tons) Value (CNY) Volume (tons) Value (CNY) Volume (tons) Value (CNY)
2015 7,788 167,688 5,117,181 24,554,288 5,124,969 24,721,976
2016 23,828 361,370 8,253,277 60,002,384.00 8,277,105 60,363,754
2017 94,226 1,431,344.00 6,998,909 48,792,204.88 7,093,135 50,223,548.88
2018 71,180 655,270.40 1,574,793 8,488,514.42 1,645,973 9,143,784.82
Total 197,022 (1%) 2,615,672.40 1,574,793 (99%) 21,944,160 22,141,182 144,453,063.70
Source: CBEEX & BETA, Annual Report of Beijing Carbon Market 2015-2019
Table 2. 2014-2018 Beijing Carbon Market Performance take a further step into renovation and remode-
– Forestry Carbon Sink Projects
ling for energy efficiency.
Trading Volume(tons)
2014 3,550 Local Governments
2015 69,065 China adopts a hybrid (top-down and bot-
tom-up) approach on climate governance, and
2016 2,530
has demonstrated great ambitions in combating
2017 2,530 climate change by ratifying the Paris Agreement
2018 87,151 and issuing its Intended Nationally Determined
Total 164,826 Commitments. With the targets set by the cen-
Source: CBEEX & BETA, Annual Reports of Beijing Car-
tral government, local governments in China are
bon Market 2014-2018 obligated to participate in the process.
Capacity Building on the Beijing Local governments taking the bottom-up ap-
ETS proach play a leading role in an ETS by initiat-
ing legislations and regulations for the system.
Trading Entities In the case of Beijing ETS, the Municipality has
The management of carbon assets is increasingly appointed a specific bureau in leading its estab-
gaining its importance as a new form of assets lishment and operation.
among regulated entities in the market, along
with capital, real and intangible assets. Good Communications between local governments are
management can allow industries to lower op- also essential, as they allows local authorities to
erational costs,increase revenue, and improve exchange and share their best practices relat-
their competitiveness in the field of sustainable ed to ETS. In this regard, Beijing, as one of the
development. On the contrary, failure in man- pilot cities in China, has been willing to share
agement could lead to depreciation of carbon its experience with other local governments. For
assets, increase in operational costs and low- instance, in 2018, Beijing provided a capacity
ered market competitiveness. building training to Hebei province on establish-
ing and operating an ETS. CBEEX has also set up
To ensure an active and robust carbon market, special funds to provide capacity building op-
annual meetings are being hosted among the portunities for cities and regions that are yet to
regulator, regulated entities and mandatory re- establish a carbon trading pilot system, such as
porting entities. Training and capacity building Jiaozuo and Changzhou.
opportunities on emissions monitoring, calcula-
tion, verification, as well as allocation method- Capacity Building for Individuals
ologies have also been provided. Through this CBEEX is one of the few institutions who are
process, more and more entities are starting to focusing on ETC capacity building programs for
foresee the importance of transitioning towards individuals. Since early 2014, CBEEX has been
low carbon productions, and are more willing to co-hosting monthly training on Carbon Asset
8Management and GHG Emissions Calculation
& Verification with the Education and Training Access to the right tools would allow cit-
Center of China’s Ministry of Human Resources ies and regions to develop their emission
and Social Security. Participants will be updated inventories with high quality data and
with the latest policies and regulations relat- efficiency. The Global Protocol for Com-
ed to the carbon market and emissions trading munity-Scale Greenhouse Gas Emission
processes. Individuals from China are eligible to Inventories (GPC) jointly developed by
apply for the qualification courses and become the ICLEI-Local Governments for Sustain-
authorized trainers. As of June 2019, over 100 ability, the World Resource Institute and
training events have been conducted by CBE- the C40 Cities Climate Leadership Group,
EX. Relevant new career paths and job positions provides a framework for accounting and
have also emerged consequently. reporting city-wide GHG emissions. The
GPC seeks to help cities developing a
Lessons Learned comprehensive and robust GHG inven-
tory to support climate action planning,
Contributions of the Beijing ETS following the principles of relevance,
The Beijing ETS has successfully triggered regu- completeness, consistency, transparency
lated entities to take measures and reduce GHG and accuracy, and further utilize the re-
emissions through technological renovation and sults for pre-feasibility studies and poli-
upgrading, which contributed to reducing Bei- cy design before initiating their carbon
jing’s total emissions and expenditure on carbon ETSs.
reduction. Through ETS mechanism, Beijing has
managed to reduce its total emission and expend- support on financing, trading platform establish-
iture spent on carbon reduction. Moving into its ment and management of carbon assets.
seventh year of operation, the Beijing ETS has
made critical contribution to the achievement For the next step,Beijing intends to put more
of the target to lower the CO2 emissions per efforts on the administration perspective of its
CNY 10,000 of GDP by 20.5% in 2020 compared to ETS for improvement. For example, some en-
2015, as set in the 13th Five-year Plan following tities in the service industry do not have high
the national requirement. emission rates, yet, are faced with high costs
of market management. The Municipality is now
In addition to reducing GHG emissions, a number looking into further elaborate the policies on
of other contributions the Beijing ETS can bring the service industry, and modify the standards
about are as follows: defined in their supporting policy documents.
Co-benefit measures for air quality control and Policy Recommendations
green development. Beijing carbon markets are The extensive experiences and measures of the
equipped with the advantages of incentive and Beijing ETS has its referential values for other
flexibility that could effectively promote en- cities who would like to establish a local ETS.
ergy transition and air pollution management.
The Beijing ETS played a critical role in bringing Cities should pay special attention to their his-
down the proportion of heavy polluting and en- torical GHG inventories early in the process of
ergy intensive industries, and advancing the Mu- ETS development. A robust foundation of high
nicipality’s competitiveness in the field of green quality historical emissions data would allow the
and high quality development in the region. regulator to calculate its business-as-usual emis-
sions, determine objectives for the ETS, and
Promotion of the national ETS. The successful identify the key sectors to cover. For example,
experience of the Beijing ETS has been chan- pre-feasibility studies and policies can be made
neled into the launch and the incremental de- upon inventories.
velopment of China’s national ETS. In particu-
lar, Beijing has contributed in terms of capacity Industries emitting the most can be the start-
building for non-pilot areas, as well as providing ing point of an ETS, as a way to maximize its
9effectiveness. In the case of Beijing, 70% of its proved. In fact, carbon asset has started to gain
annual emissions come from the tertiary indus- its importance as a form of investment and fi-
try,and the pilot ETS, therefore, covers univer- nancial product for individuals and non-covered
sities, public transport and medical institutions, entities. Especially, entities that are not yet
etc. As of 2020, the Beijing ETS has covered covered in the ETS could accumulate experienc-
around 45% of the city’s total emissions.14 es for better performance in the future as they
participate voluntarily.
When it comes to the establishment of the sys-
tem, it is important for local governments to Monitoring, supervision and enforcement of
ensure their policy framework is comprehen- penalties should be conducted appropriate-
sive and consistent. The blueprint of the car- ly and impartially. A well-established ETS can
bon market laid out by Beijing’s “1+1+N” policy be an effective measure for emission reduction
mechanism has provided a solid foundation for and climate change mitigation, and relevant in-
the operation of its ETS. centive measures and sanctions could increase
its compliance rate. In the case of Beijing ETS,
Meanwhile, extra efforts on establishing a regulated entities failing to comply with the al-
comprehensive and well-functioning system, lowance or submit emissions and/or verification
and stabilizing the market has been made by reports on time will face penalties. In addition,
Beijing. The Beijing ETS consists: GHG emission records of non compliance and negligence will
reporting& registration system and online trad- be kept on the entity’s profile in the country’s
ing platform; third-party verification; emission national credibility system, which may have im-
allowance verification and issuance; as well as pacts on its future capital financing.
emissions trading and market liquidity.
Inclusive, innovative and multi-stakeholder
Allowance allocation is a critical determinant engagement are success factors of the Beijing
of its distributional impacts and akey to an ef- ETS. Beijing has taken a lead in promulgating
ficient ETS. The objectives and design features the management method for carbon emission
of allowance allocation should meet balance of offsetting. In addition to trading of allowances,
transparency, acceptability, operability, fair- entities can also generate emission units through
ness, efficiency, liquidity and stability of the participating in verified voluntary emission re-
market. Allocation methods vary depending on ductions programs and/or implementing ener-
its objectives and can vary across sectors. In re- gy-conservation renovation and forestry carbon
sponse to the regulated entities who are wres- sink projects. This has provided space for a wide
tling with an insufficient amount of allowances variety of innovative projects and initiatives to
and have made appeals for extra units, the Bei- be carried out on the ground, contributing to
jing Municipality has been nose-diving into the GHG emission reductions in the city.
allocation mechanism for optimization.
Local governments play a leading role in the
Ensuring market liquidity may be challeng- establishment and operation of ETS. Local gov-
ing. The limited allowance supply and the lack ernments are directly engaged in the process
of awareness and knowledge on carbon asset of policy design, implementation and supervi-
management among the regulated entities were sion of the market operation. Through provid-
some major challenges regarding market liquid- ing guidance and capacity building to covered
ity the Beijing ETS encountered in its initial op- entities, local governments can ensure that all
erational years. However, as the scale of the sys- entities are on the right track and are aware of
tem continued to expand, with more sectors and their responsibilities. They can also share their
entities covered, as well as the participation of experiences and learn from the best practices
individuals, the market liquidity has largely im- of peers.
14. ICAP, 2020a
15. UNFCCC, 2017
16. CBEEX & BETA, 2019
10Snapshot of Beijing’s Carbon Market 2018 Forestry Carbon Sink Projects
in 2018 Total Projects 4 Projects
Total Trading Volume 87,151 tons
Due to COVID-19,CBEEX is yet to publish its 2019
CNY 1.97 Million
Annual Report. A snapshot of the Annual Report Total trading value
≈USD 0.28 million
of Beijing Carbon Market 2018 is presented be-
low.16 Number of Trades 23 trades
2018 Beijing Emissions Allowance References
Trading Days 243 days
Beijing Municipal Ecology and Environment Bu-
CNY 338,210,096.88
Total Trading Value reau. (2020, April 13). Notification from the
≈USD 47,349,413.56
Beijing Municipal Ecology and Environment
8,941,083 tons Bureau on Carbon Emissions Management
Total Trading Volume
Online: 36.27% OCT: 63.72%
of Entities and Trading Pilot in 2020 [Press
Average Price of Online CNY 57.98/ton
release]. Retrieved from http://sthjj.bei-
Trading ≈USD 8.12/ton
jing.gov.cn/bjhrb/index/xxgk69/zfxxgk43/
fdzdgknr2/hbjfw/1758471/index.html
CBEEX & BETA. (2016). Annual Report of Bei-
jing Carbon Market 2015. Beijing: China Bei-
jing Environment Exchange. Retrieved from
http://www.cbeex.com.cn/images2016/
xz_1.pdf
CBEEX & BETA. (2017). Annual Report of Bei-
jing Carbon Market 2016. Beijing: Chi-
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