On September 2, 2026, China's Ministry of Ecology and Environment (MEE) issued the national carbon emissions trading market (ETS) allowance cap and allocation plan for power generation in the 2025 and 2026 compliance years and for steel, cement, and aluminium smelting in 2026, under binding departmental rule Guohuan Gui Qihou [2026] No. 1 (国环规气候〔2026〕1号). Signed September 1 and gazette-printed September 2, the scheme fixes the total allowance caps and the intensity-based allocation method each covered installation must apply to compute, trade, and surrender Chinese Certified Emission Allowances (CEA) for those periods.
The plan is the first consolidated allocation instrument to span both the power sector and the three heavy industries MEE added to the national ETS in 2025, and it supersedes the draft circulated for comment in late July (环办便函〔2026〕243号, comment close August 5). It binds every covered key emitting unit (重点排放单位) and the provincial ecology bureaus that must issue quotas against it. Xinhua reported the issuance on September 3.
Which sectors and compliance years does the plan cover?
Power generation is covered for the 2025 and 2026 compliance years, while steel, cement, and aluminium smelting are covered for 2026 alone, their first full allocation year under the national market. The national ETS launched for power on July 16, 2021, and MEE's March 26, 2025 work plan brought the three heavy industries into the scheme; this rule is the concrete cap-and-allocation instrument that operationalizes that expansion. It is not the further sector-wide expansion the State Council's August 2025 guideline schedules for 2027, which remains on the horizon.
How are allowances calculated and allocated?
The scheme retains the national ETS's intensity-based benchmark method: allowances are computed from output multiplied by a sector-specific benchmark emission intensity and an adjustment coefficient, not from an absolute historical-emissions cap. Benchmark values are progressively tightened versus earlier cycles, so the implicit cap tightens as installations become more efficient and the most carbon-intensive operators face the largest shortfall. The plan provisionally pre-allocates 50% of expected allowances, then reconciles the balance against verified emissions, and permits covered units to offset part of their surrender obligation with Chinese Certified Emission Reductions (CCER) from the national voluntary market.
Who must act, and what must they surrender?
Covered key emitting units must compute their allowances under the scheme, trade CEA on the national carbon exchange to cover any shortfall, and surrender allowances matching their verified emissions. The obligations fall on the large power generators (Huaneng, Datang, Huadian, SPIC, China Energy), the major steelmakers (Baowu, HBIS, Shagang), the cement producers (Conch, CNBM), and the aluminium smelters (Chalco, Hongqiao). Provincial ecology bureaus must issue the quotas to installations in their provinces against this scheme, and the national carbon registry and trading institution register and settle the allowances. The full text of the notice and plan is published on the MEE website.
| Sector | Status before this plan | Under Guohuan Gui Qihou [2026] No. 1 |
|---|---|---|
| Power generation | Covered since the 2021 market launch | 2025 and 2026 allowance caps and allocation set |
| Steel smelting | Added to the ETS in March 2025, allocation pending | 2026 first full allocation year |
| Cement | Added to the ETS in March 2025, allocation pending | 2026 first full allocation year |
| Aluminium smelting | Added to the ETS in March 2025, allocation pending | 2026 first full allocation year |
Continuous, per-jurisdiction real-time monitoring surfaces allowance-plan changes the moment MEE publishes them.
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Next steps: confirm whether your installations fall under the covered sectors and compliance years, compute your allowance position against the scheme's benchmarks, brief trading and sustainability teams on the pre-allocation and surrender timeline, and track the 2027 all-sector expansion that will widen the scheme again.
