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Shanghai ETS

The Shanghai Emissions Trading Scheme (Shanghai ETS) is one of the seven ETS pilot programmes launched in China, and is the only one that includes aviation. It started operating in November 2013.


The Shanghai ETS was designated as one of the seven ETS pilot programmes in 2011. The other ETS pilots are: Shenzhen, Guangdong, Hubei, Beijing, Chongqing and Tianjin. The pilots are being implemented gradually until 2016. 

Shanghai ETS includes industrial sectors, but also include non-industrial sectors such as aviation, ports, airports, railways and commercial buildings that emit more than 10,000 tCO2 / year in 2010-2011.

The objective of the Shanghai ETS is to cut carbon intensity by 19% below 2010 level by 2015. Emissions covered is about 150 m tCO2 (2010), which represents around 60% of the total emissions of the Shanghai province (250 m tCO2 in 2010).

The implementation timeline is:
  • 2011: designation of Shanghai as one of the seven ETS pilot programmes
  • 2012-2013: preparation
  • 26 November 2013: start
  • 2013-2015: first trading period


A total of 16 industry sectors are covered as well as non-industrial sectors such as airlines, ports, airports, railways and commercial buildings (e.g. hotels). The threshold for the non-industrial sectors is 10,000 tCO2 per year.

Six airlines are included in the Shanghai ETS: China Eastern, Shanghai Airlines, China Cargo Airlines, Juneyao Airlines, Spring Airlines and Yangtze River Express.


There are three methods of allocation of free allowances:
  1. Historial emissions (grand-fathering): available to most sectors including aviation (one-off free allocationn for 2013-2015 based on 2009-2011 emissions)
  2. Industry benchmark (benchmarking): available to specific sectors only such as energy
  3. Auctioning is also considered in the future.
The limit on the use of offset for compliance is set at 5%. The exchange is the Shanghai Environment and Energy Exchange (SEEE).

Between 120 and 130 m tonnes of emissions allowances are allocated annually. 

Organizational structure


The stakeholders are as follows:
  • the operators who must monitor, report, verify and surrender
  • the Government regulator (Shanghai DRC) who administers the system, regulate the participants, operates the registry and certify the verifiers
  • the registry where allowances are recorded and transfered
  • the carbon exchange (Shanghai Environment and Energy Exchange) where allowances are traded
  • the third-party independent verifier who conduct verification of the operator's emissions report

Source: Shanghai Environment and Energy Exchange


The Shanghai ETS is similar to the EU ETS as operators must monitor, report and verify their emissions, and then surrender an amount of allowances that correspond to the previous year verified emissions expressed in tonnes of CO2.
The key deadlines are:
  • In 2013, participating airlines had to prepare and submit a monitoring plan describing the procedures to monitor fuel consumption
  • First deadline for the submission of emissions report to the regulator is 31 March 2014
  • First deadline for the submission of verification report to the regulator is 15 April 2014
  • Period when the regulator publishes the audit of the report and for compliance in the registry: 1-30 June 2014
A guideline for MRV entered into force in January 2013. In addition, nine sector-specific guidance documents (including one for aviation) were published. There is online reporting system that participants must use to report their emissions.

Non-compliance penalties are in the range of 50,000-100,000 CNY.

> For more information, download the 'Introduction to China's carbon market' from ICIS
> For more information, read our F.A.Q.

Source: Shanghai Environment and Energy Exchange, ICSS and ICAP