Key challenges for the establishment of the monitoring, reporting and verification (MRV) system in China’s national carbon emissions trading market

Abstract

An effective system for monitoring, reporting and verification (MRV) is the cornerstone of any carbon emissions trading market. This paper analyses existing MRV frameworks in China, including under the seven emission trading pilot schemes, to identify four key challenges for the establishment of an effective MRV system for China’s forthcoming national carbon emissions trading market: (1) ambiguity in the legal status of relevant policies and regulations, (2) unclear requirements for the content of monitoring plans, (3) lack of consistency and harmonization in accounting and reporting guidelines, and (4) lack of information technology (IT). The paper then considers the experiences and lessons of the European Union Emissions Trading Scheme (EU-ETS) and the MRV systems in the seven carbon emissions trading pilots, and puts forward suggestions for tackling the four key challenges. Key policy insights It is crucial to create general framework legislation that is legally binding and of a sufficiently high legal status to facilitate legal enforcement of the MRV requirements and increase the compliance levels of MRV activities. Clear rules on the content of the monitoring plan and development of templates would harmonize approaches across regions and between reporting entities. It is important for implementing regulations to include specific requirements on monitoring and reporting in order to ensure compliance with the main monitoring and reporting principles. Use of IT should gradually evolve towards an integrated system that covers the whole compliance cycle, including monitoring plans, emission reports, verification and verification management, as well as multiple stakeholder access.