China kicks off consultation on expanding compliance carbon market to cement sector

China has kicked off public consultation on drafting guidelines around emissions accounting and verification for the country's cement sector, laying the foundation for its inclusion in the national compliance carbon market, the Ministry of Ecology and Environment said in a notice late April 3.

The cement sector is responsible for about 1.35 billion mt of CO2 emissions annually, which accounts for around 13% of China's total CO2 emissions, data from the China Cement Association showed. Nearly 60% of the world's total cement is produced in China, because of which putting a price on the sector's emissions is also vital toward global decarbonization efforts.

Emissions from cement clinker production will be covered by the national compliance market, the consultation document showed. The production of cement clinker, an intermediate raw material in cement production, tends to comprise about 95% of total CO2 emissions in the cement supply chain process.

In line with the overarching legislation, the compliance market is expected to cover cement clinker producers that have annual greenhouse gas emissions above 26,000 mtCO2e.

Cement producers are required to report their direct emissions from fossil fuel combustion and clinker production process, as well as indirect emissions from power consumption, according to the consultation document.

The consultation document allowed producers to report "zero emissions" from power consumption if they use captive non-fossil generation units or purchase renewable energy through power purchase agreements. Such an arrangement would also improve the sector's renewable energy consumption.

China's national compliance market currently only covers the power generation sector that contributed about 40% of the country's total CO2 emissions, the environment ministry's data showed.

This year, China's compliance carbon market is likely to expand to cover three new sectors, including aluminum smelting, cement, as well as iron and steel, which together add up another 30% of the country's total CO2 emissions, exchange officials and industrial experts said.

Earlier in March, the MEE had begun consultation for the aluminum sector's emissions accounting and verification.

The consultation document only provided instructions for companies to calculate and report their emissions and for provincial governments to conduct verifications. It did not specify how compliance emission allowances, namely CEAs, will be allocated to cement producers after being enrolled into the emissions trading system.

China's weighted average CEA price was at Yuan 87.67/mtCO2e ($12.12/mtCO2e) as of April 3, official carbon exchange data showed.

The consultation is open to all companies and individuals to comment and will close April 15.