China's Ministry of Ecology and Environment (MEE) on July 27, 2026 opened a public consultation on the draft national carbon emissions trading market allowance allocation plan covering power generation for 2025 and 2026 and steel, cement and aluminum smelting for 2026. The notice, 环办便函〔2026〕243号, was issued by the MEE General Office on July 22, 2026 and posted on the MEE website on July 27, 2026. Comments close on August 5, 2026, leaving covered entities nine days to respond.
The draft sets quota totals and allocation rules for the four sectors already inside the national ETS. It is the first full-year allocation plan for the three sectors added to the market in March 2025, and it fixes the 2025 and 2026 allowance positions for power. The draft text and its compilation notes are available on the MEE consultation page.
What does the draft allocation plan change?
The plan carries the power sector further along the shift from grandfathering to intensity-based benchmarking that began with the 2025 compliance year. For steel, cement and aluminum smelting it establishes the benchmark methodology that will determine how many free allowances (CEA, 碳排放配额) each covered installation receives for 2026. Allowances remain free under the current framework, so the consultation is where benchmark values, sector boundaries and correction factors are fixed before they bind.
For aluminum smelting, the plan also fixes how non-CO2 gases are counted. The ETS regulates CF4 and C2F6 emissions from primary aluminum alongside CO2, and the allocation methodology must translate those into allowance units. Offsets remain capped at 5% of verified emissions through CCER (China Certified Emission Reduction), which leaves the benchmark as the main lever on the compliance position.
Who has to act, and by when?
Covered entities in the four sectors must model their allowance positions against the draft benchmarks and submit written comments by August 5, 2026. In power, that means the large generating groups, Huaneng, Datang, Huadian, SPIC and China Energy, plus the provincial ecology and environment bureaux that administer compliance. In the newly added sectors it means steelmakers such as Baowu and Ansteel, cement producers including CNBM and Conch, and aluminum smelters such as Chalco and Hongqiao, together with the carbon-trading desks that hedge their positions.
Provincial ecology bureaux should treat the draft as the basis for their 2026 compliance administration, because the allocation rules flow directly into surrender obligations under the Interim Regulations on the Administration of Carbon Emissions Trading (State Council Decree No. 775, effective May 1, 2024).
How does this fit the ETS expansion timeline?
The consultation is an annual allocation milestone, not the 2027 all-sector expansion that the State Council guideline set out in August 2025. The national ETS launched in 2021 for power generation, covering 40% of national CO2, and was expanded on March 26, 2025 to steel, cement and aluminum smelting, raising coverage to 60%. The previous allocation plan for the 2024 and 2025 power compliance years was released on November 16, 2025. This draft continues that annual cycle for power and applies it to the first full year of the three new sectors.
| Sector | Compliance years in scope | Status in ETS |
|---|---|---|
| Power generation | 2025, 2026 | Covered since 2021 |
| Steel | 2026 | Added March 26, 2025 |
| Cement | 2026 | Added March 26, 2025 |
| Aluminum smelting | 2026 (CO2, CF4, C2F6) | Added March 26, 2025 |
What should compliance teams do now?
Run the draft benchmarks against verified 2025 emissions to estimate the 2026 allowance position, flag any benchmark value or sector boundary that would create a shortfall, and file written comments with the MEE Department of Climate Change before the deadline. Comments go to [email protected]. Continuous, per-jurisdiction real-time monitoring surfaces this kind of allocation change the moment it publishes, so teams can start modeling before the comment window closes.
Take advantage of this real-time watch
Confirm whether your installation is in scope for the 2026 allocation, check the draft benchmark values against your verified emissions, and brief the trading desk on the 5% CCER offset limit before August 5, 2026.
