|Status of Implementation Progress (Outputs, Activities, and Issues)
The technical assistance (TA) was approved on 2 October 2012 and became effective on 29 October 2012 with Shanghai Municipal Finance Bureau as the executing agency and Shanghai Environment and Energy Exchange (SEEE) as the implementing agency. Sinocarbon Innovation & Investment Co. Ltd. (SCII), the selected consulting firm was engaged on 25 February 2013.
The inception workshop was held at the SEEE facility on 18 April 2013 with 24 participants from ADB, SEEE, SCII, and carbon market experts. A representative from SEEE chaired the inception workshop. SEEE presented the overview of Shanghai pilot emissions trading scheme (ETS) development and the role of SEEE in Shanghai ETS design. SCII presented the (i) project's overview, which includes research objectives and goals, implementation plan for project tasks and outputs; (ii) overview of the Shanghai and other ETS development in pilot cities and provinces; (iii) details of Shanghai ETS development and its challenges; (iii) detailed research approaches and methodologies; and (iv) project team members. Carbon market experts from Fudan University also made a presentation on the PRC's finance market, which can serve as useful background information on how a new emerging carbon market can be designed and operated in the near future.
The interim workshop was held at Holiday Inn Shanghai Pudong, Shanghai, PRC on 10- 11 December 2013. The workshop was organized as a joint workshop between TA 8178-PRC and RETA 8223. A total of 60 participants and resource persons attended the workshop, including Shanghai Development and Reform Commission; Shanghai Finance Bureau (SFB), Shanghai Environment and Energy Exchange (SEEE), national and local government officials and technical experts from the PRC, Thailand and Viet Nam; international organizations and academic institutions such as United Nations Framework Convention on Climate Change, Oxford University, London School of Economics and Political Science, Tsinghua University; and also representatives from private sector. At the workship, the information on the progress on Shanghai pilot ETS was shared among participants. Shanghai pilot ETS covers 16 sectors with 191 enterprises, whose emissions are more than 20,000 carbon dioxide ton equivalent (CO2 teq) for energy intensive industry and 10,000 CO2 teq for non-industry sector. The cap is set based on energy intensity and the allocation method is determined mostly based on grand-fathering with reference of 3 year average data reported for 2009-2012. Yet, the use of benchmarking is limited: Only power sector's emission allowance is allocated for each installation using the benchmarking method. The general guideline and sectoral methodologies for monitoring, reporting and verification (MRV) were developed. During the pilot period, the targeted enterprises are required to get their emission report verified by a third party. Shanghai pilot ETS trading was launched on 26 November 2013. The trading of Shanghai Emissions Allowances (SHEAs) and/or Chinese Certified Emissions Reduction (CCER) are carried out in the spot market either in open outcry (for small transaction) or negotiated transaction (for large orders). The accumulated volume of transaction since the launch of the Shanghai ETS is about 12,500 tons of CO2. Currently, the trading activities are slow and less active, which is common for "price for carbon" in a "limited market." As for the progress of TA 8178, the following key outputs were presented, which would contribute to the Shanghai pilot ETS design: (i) A computable general equilibrium model was constructed to evaluate plausible impact of Shanghai pilot ETS on targeting sectors and overall economy using different scenarios. Yet, limited data availability and unknown variables would affect the outcome of modeling. (ii) Using sectoral emission data and established assumption, possible benchmark levels for selected sectors and products including iron and steel, power & heat, refineries, aviation, chemical sectors in Shanghai were presented in comparison with European cases. The need of more detail data was raised as an issue. In addition, ex-post adjustment for benchmarking was recommended as a necessity to ensure the suitable benchmark in Shanghai. (iii) Several policy measures were recommended to oversee the carbon trading market under different scenarios. These measures could include adjustment of emission permits under- and/or over-supply in the market, initial allocation, proximity to the compliance deadline, penalty size and enforceability, permit banking and the time horizon. Difficulty of using only spot market is discussed and the need of future was strongly recommended to ensure market liquidity. The workshop concluded with positive feedbacks from a range of participants, including other ETS pilot representatives in the PRC.
The final workshop, entitled, Workshop on China Carbon Market: From Pilots to National Emissions Trading Scheme (ETS) , was held in Beijing on 19 December 2014 with over 120 participants, including representatives from the National Development Reform Commission (NDRC), Beijing Development Reform Commission, Shanghai Finance Bureau, Shanghai Environment and Energy Exchange, United Nations Development Programme, United Kingdom Embassy in the PRC, London School of Economics, Tsinghua University, and other pilot emissions trading schemes in the PRC. The project outputs of ETS economic impact analysis, allocation methods for benchmarking, and carbon finance products for Shanghai pilot ETS were presented and experiences from other pilot ETSs were shared. Reflecting the Government of PRC's announcement on upcoming national ETS, NDRC provided high-level vision on ETS policy and framework in the PRC. The workshop concluded with positive feedback on the project outputs and heated discussion on the steps toward a national ETS. The draft final TA report was submitted prior to the final workshop and finalized after incorporating comments from the EA, and IA, and other ETS experts.