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China prepares groundwork to include refining, petrochemical sector in emissions trading scheme

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China prepares groundwork to include refining, petrochemical sector in emissions trading scheme

Highlights

Research underway by China Petroleum and Chemical Industry Federation

Refining, petrochemicals account for 14% of China's emissions

Beijing is preparing the groundwork for including the refining and petrochemical sector in China's national emissions trading scheme, or ETS, as part of efforts to meet its target of net-zero emissions in 2060, sources said July 7.

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The Ministry of Ecology and Environment in late June commissioned the China Petroleum and Chemical Industry Federation to carry out the preparation work, a source with knowledge of the matter said.

The federation will conduct research into the emissions allowance allocation plan, national ETS test, carbon market monitoring, reporting and investing system development for the sector, according to the source.

The federation is China's government think tank for the refining and petrochemical sector. It was earlier commissioned by National Development & Reform Commission to research crude import quota allocations when the country opened that feedstock access route to independent refineries in 2015.

Carbon emissions by the refining and petrochemical sector account for around 14% of China's total emissions, according to industry sources.

The country's refining capacity is expected to expand to 905 million mt/year in 2021 from 880 million mt/year in 2020, according to Sinopec, the world's biggest refiner by capacity.

The sector currently participates in a few provincial carbon trading schemes, "but the provincial allowance allocations and emission investigations are quite relaxed, and are unlikely to boost the industry's need to further control emissions, lift energy efficiency and trade emissions," a Beijing-based source said.

For example, the emissions allowance for the sector in Guangdong, a pilot provincial ETS in China, covers 97% of a refining or petrochemical plant's emissions.

Therefore, including the sector in a national ETS, tightening allowance allocation rules and standardizing emission criteria is a step toward spurring on the sector to enact emissions controls to meet the country's net zero target, sources said.

Related blog: China's long march to zero carbon

Launch postponed

China's national carbon ETS was earlier scheduled to launch by end June, but has been postponed to an undisclosed date, a spokeswoman for the Shanghai Environment Energy Exchange said July 1.

Under the Ministry of Ecology and Environment's plan, eight sectors will be included in the national carbon ETS -- power generation, (refining and) petrochemicals, chemicals, building materials, steel, nonferrous metals, paper, and aviation.

The first batch of national ETS participants includes 2,225 power plants with historical emissions exceeding 26,000 mt/year of CO2 equivalent, for which benchmark emissions per megawatt-hour will be specified by plant type, according to the ministry's action plan released in December 2020.

The ministry has also commissioned the China Iron & Steel Association to seek input from the steel industry around carbon emissions monitoring and accounting, allowance allocation, carbon asset management, low carbon iron-making and carbon capture and storage, S&P Global Platts reported June 29.