The multilateral legal regime on climate change mainly consists of the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, and the Paris Agreement. China is a party to all of them. China has actively and constructively participated in international negotiations on climate change. Its role has evolved from being an active participant, an active contributor, to becoming an active leader. China has promoted and initiated the establishment of multilateral dialogue mechanisms such as the BASIC Ministerial Conference and the Ministerial Conference on Climate Action. Additionally, China has actively coordinated the negotiation positions of the BASIC countries, the Like-Minded Developing Countries, and the Group of 77. China has also participated in dialogues and negotiations on climate issues within the framework of the G20, the International Civil Aviation Organization (ICAO), the International Maritime Organization (IMO), the BRICS Conference, and other forums.

China’s positions on the primary climate change issues are as follows.

• Climate change mitigation – as outlined in China’s Policies and Actions for Addressing Climate Change released by the State Council in 2008, China upholds the principle of Common but Differentiated Responsibilities, holding that since developed and developing countries bear distinct historical responsibilities for contributing to climate change and possesses varying development needs and capacities. Therefore, imposing restrictions based on a uniform scale is deemed inappropriate and unfair. It is necessary to take full account of the national conditions and capacities of each country and adhere to the institutional arrangement whereby each country makes its own contribution to the fullest extent of its capabilities and nationally determines its own individually, rather than adopting a “one-size-fits-all” approach.
• Climate change adaptation – China holds that, given the ecological environment, industrial structure, and level of socio-economic development in many developing countries, their ability to adapt to climate change is generally weaker. Consequently, they are more vulnerable than developed countries to the adverse impacts of climate change. Therefore, enhancing the capacity to adapt to climate change should be considered a crucial element in addressing climate change.
• Climate finance – during the United Nations Climate Action Summit, China emphasised that it considers climate finance to be a key issue in effectively addressing climate change. As the largest developing country, China also has the right to receive financial assistance. China is actively collaborating with the World Bank, the Asian Development Bank, and other multilateral institutions. It has been advancing the climate investment and financing initiatives through the Asian Infrastructure Investment Bank, the Silk Road Fund, and Chinese banks. This effort aims to assist the countries involved in the Belt and Road construction in achieving a mutually beneficial outcome for both climate change and development.
• Capacity building and technology transfer – China asserts that the four wheels of “mitigation”, “adaptation”, “technology” and “finance” should run independently and in concurrently. It emphasises the crucial roles of “technology” and “finance” are very important in assisting developing countries to combat climate change. In China’s Policies and Actions for Addressing Climate Change, it is emphasised that the special difficulties and concerns of developing countries should be fully recognised; developed countries should take the lead and set examples in addressing climate change by providing financial, technological, and capacity-building support to developing countries. Since 2007, China has been offering financial and technological aid to Africa and small island developing countries through the South-South cooperation mechanism on climate change.

China is actively engaged in regional climate change legal regimes such as the South-South Cooperation Mechanism on Climate Change, the BRI International Green Development Coalition, and the Tripartite Environment Ministers Meeting involving China, Japan and Korea.

China has actively participated in regional climate change legal mechanisms and cooperation. For example, it has actively promoted the initiation and development of South-South cooperation on climate change. In April 2019, China launched the “Belt and Road” eco-environmental protection big data service platform and implemented the “Belt and Road” South-South cooperation programme to address climate change. It also formally established the BRI International Green Development Coalition, providing a platform for policy dialogues and communications, environmental knowledge and information sharing, and green technology exchanges for the “Belt and Road” green development cooperation.

Since June 2007, when the State Council issued China’s National Climate Change Programme, China has introduced a series of policies and regulations related to addressing climate change, including the “1+N” policy system, which follows the goal of “carbon peaking and carbon neutrality (see 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors). To a certain extent, these policies have been enacted to meet the Nationally Determined Contribution (NDC) targets under the Paris Agreement, and are therefore informed by the multilateral regimes for addressing climate change. Also, to some extent, they are informed by the evolving science of climate change.

China prioritises scientific research on climate change and attaches great importance to the latest research progress. In 2006, it established the National Climate Change Expert Committee as an important decision-making support body and a national-level think tank for the country’s efforts to address climate change. The committee’s main responsibility is to provide advice and recommendations on scientific issues related to climate change, as well as on China’s long-term strategies and major policies to address climate change. Since then, China has issued four National Assessment Reports on Climate Change, in 2006, 2011, 2014 and 2022. These reports cover scientific understanding of climate change, assessment of climate change impacts, risks, and adaptation. They serve as an important basis for the formulation of the targets, policies, and actions to address climate change.

China’s NDC Under the Paris Agreement

In June 2015, the Chinese government submitted “Enhanced Actions on Climate Change: China’ s Intended Nationally Determined Contributions” to the UNFCCC.

In 2020, China updated the NDC and officially submitted it to the UNFCCC in October 2021. The updated targets are as follows: to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060; to reduce carbon dioxide emissions per unit of GDP by over 65% by 2030 from the 2005 level; to increase the share of non-fossil fuels in primary energy consumption to around 25% by 2030; to increase forest stock volume by 6 billion cubic metres by 2030 from the 2005 level; and to increase total installed capacity of wind and solar power to over 1.2 billion kilowatts by 2030.

Compared to the previous targets, the 2021 updated NDC added the targets of achieving carbon neutrality by 2060 and reaching a total installed capacity of wind and solar power of more than 1.2 billion kilowatts by 2030. It also strengthened the 2030 carbon dioxide emissions control target per unit of GDP, raised the target for the share of non-fossil energy in primary energy consumption, and increased the target for forest stock by 2030.

The realisation of China’s NDC targets has no preconditions. In 2020, President Xi Jinping emphasised during the 75th general debate of the United Nations General Assembly that tackling climate change is not merely a request from others but an imperative for China’s sustainable development. He highlighted that it is China’s responsibility to foster a global community of shared future for humankind.

Approach to IPCC and Legal Regimes Under the Paris Agreement

The Sixth Assessment Report of the IPCC

Following the publication of the Sixth Assessment Report of the IPCC, the Director of the National Climate Centre of China stated that “the concept of ecological civilisation and the Dual Carbon goal proposed by China are in line with the tone of the entire report”.

Transparency framework

China is gradually progressing with efforts to address climate change in accordance with the requirements of the Enhanced Transparency Framework (ETF) of the Paris Agreement. In 2022, China’s Ministry of Ecology and Environment (MEE) and other departments issued the Implementation Plan on Accelerating the Establishment of a Unified and Standardized Carbon Emission Statistics and Accounting System. This plan systematically deploys the focus of domestic Measurement, Reporting, and Verification (MRV) in the next phase. China has also started preparing a Biennial Update Report (BUR) with reference to the ETF. In December 2023, it released the Third PRC Biennial Update Report on Climate Change. The report took into account the most recent requirements of the modalities, procedures, and guidelines (MPGs) for ETF of the Paris Agreement.

Loss and damage

Xie Zhenhua, Special Representative of President Xi Jinping and China’s Special Envoy for Climate Change Affairs, has publicly stated that China is strongly supports the “loss and damage” claims made by developing and vulnerable countries. China is also a developing country, and climate disasters have caused significant losses there.

Internationally Transferred Mitigation Outcomes (ITMOs) and the carbon market

As mentioned in the press conference on Policies and Actions for Addressing Climate Change held by the State Council Information Office in 2021, China advocated that the market mechanism under Article 6 should provide financial support for developing countries’ adaptation to climate change. It should not require parties to adjust their NDC emission targets for the transfer of emission reductions from sources outside the scope of their NDCs, and should allow parties to use their Certified Emission Reductions (CERs) prior to 2020 to meet their NDC targets and participate in market transactions.

Climate finance and technology transfer

In March 2022, during the Arria-formula Meeting on “Climate Financing for Sustained Peace”, China’s Deputy Permanent Representative to the United Nations advocated that developed countries should provide sufficient financial resources to developing countries to help them better address climate change. This responsibility is not only a moral responsibility that the developed countries cannot evade, but also an international obligation that they must fulfil under the UNFCCC and the Paris Agreement. It is also and an important demonstration of the principle of common but differentiated responsibilities and respective capabilities.

In terms of technology transfer, the China Plan for the Transformation and Construction of Global Governance published on the official website of the Ministry of Foreign Affairs of China mentioned that developed countries should effectively provide financial, technical, and capacity-building support to developing countries. It was further mentioned in the Fourth National Information Communication on Climate Change of the People’s Republic of China in December 2023 that the transfer of climate-friendly technologies has been hindered by policies related to anti-globalisation. The Information Communication also pointed out that anti-globalism and the generalisation of national security concepts have risen in recent years. This makes the transfer of climate-friendly technologies more difficult, and has a negative impact on the transfer of climate-friendly technologies in related industries, especially to developing countries.

China has not formally promulgated specific laws on climate change yet. In 2016, the annual legislative plan of the State Council has included the legislation to address climate change as a research project. In 2020, China proposed in its updated NDC the study and formulation of a specific law on carbon neutrality. In the legislative plan of the Standing Committee of the 14th National People’s Congress issued in 2023, legislation addressing climate change, carbon peaking and carbon neutrality has been included in the list of legislative projects that “require further research”.

Although China has not enacted climate change-specific legislation yet, when the Air Pollution Prevention and Control Law was revised in 2015, new provisions were added to provide for coordinated control of air pollutants and greenhouse gases (GHGs). In addition, since the State Council released China’s National Climate Change Programme in June 2007, China has issued a series of policies and regulations aimed at addressing climate change. These policies and regulations are all within the framework of the Constitution and actively encourage and support efforts to address climate change. The 2018 amendment to the Constitution included “ecological civilization”, and actively addressing climate change is an important tool for China to strengthen the development of ecological civilisation and achieve the goal of a “Beautiful China”. In December 2023, the Opinions on Comprehensively Promoting the Development of a Beautiful China issued by the Central Committee of the Communist Party of China (CPC) and the State Council emphasised the need to effectively address the negative impacts and risks of climate change, which is considered the safety bottom line for the development of a “Beautiful China”. Therefore, within China’s constitutional framework, there is encouragement and support instead of obstacles to the policies and regulations aimed at addressing climate change.

China and other parties to the Paris Agreement have implemented climate change policy actions by issuing joint statements and cooperating on projects to address climate change. For example, in November 2023, China and the United States collaboratively issued the Sunnylands Statement on Enhancing Cooperation to Address the Climate Crisis, deciding to establish the “Working Group on Enhancing Climate Action in the 2020s” to exchange information on policies, measures, and technologies aimed at controlling and reducing emissions, to share their respective experiences, and to identify and implement cooperative projects. Another example is that, as of September 2023, China has implemented 75 climate change mitigation and adaptation projects with 40 developing countries, as reported in the 2023 Annual Report on China’s Policies and Actions for Addressing Climate Change. The aforementioned cooperation is independent of Article 6.2 of the Paris Agreement.

At present, China has not established an action framework under Article 6 of the Paris Agreement, nor has it designated a national authority to deal with Article 6.4.

China’s existing carbon market consists of the National Carbon Emission Trading Market and the National Trading Market for Voluntary GHG Emission Reductions (see 5.1 Carbon Markets).

At present, China has not concluded formal bilateral agreements with other parties for cooperation in achieving emission reductions under NDCs pursuant to Article 6.2 of the Paris Agreement.

In China, the CPC Central Committee, the State Council, and the MEE, which is the competent authority for addressing climate change, can formulate climate change-related policies.

In June 2007, the State Council established the National Leading Group on Climate Change, Energy Conservation, and Emission Reduction as a cross-sectoral comprehensive body for deliberation and coordination in China’s response to climate change, energy conservation, and emission reduction. This group is headed by the Premier of the State Council. Thirty central governmental departments are members of this group, including the MEE, the National Development and Reform Commission (NDRC), the Ministry of Foreign Affairs, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the Ministry of Natural Resources, the Ministry of Housing and Urban-Rural Development, the Ministry of Transport, the Ministry of Water Resources, and the Ministry of Agriculture and Rural Affairs.

Before 2018, China’s competent authority responsible for addressing climate change was the NDRC. In 2018, as part of a national institutional reform, the duty of addressing climate change was transferred to the newly-formed MEE. The MEE is tasked with organising and formulating major strategies, plans, and policies for addressing climate change and reducing greenhouse gas emissions. Additionally, it leads and coordinates participation in international negotiations on climate change with relevant departments and ensures compliance with the UNFCCC.

The Department of Climate Change in MEE is responsible for comprehensively analysing the impact of climate change on the economic and social development. It takes the lead in the national implementation of the UNFCCC, organises the implementation of the Clean Development Mechanism, and undertakes the specific work of the National Leading Group on Climate Change, Energy Conservation, and Emission Reduction.

In addition, China has established the National Centre for Climate Change Strategy and International Cooperation (NCSC) as an institution directly under the leadership of the MEE, with responsibilities that include organising and conducting research on policies, regulations, strategies and plans to address climate change. It also provides technical support for domestic compliance, statistical accounting and assessment, management of carbon emissions trading, international negotiations, external cooperation, and communication.

Based on the work that has been conducted, we believe that the administrative departments and institutions mentioned are fully capable of formulating China’s climate change policies and facilitating the execution of the national climate change strategy and associated tasks. They play a vital role in addressing climate change, and their efforts align with China’s national circumstances and have proven to be effective.

Policies and Regulatory Mechanisms for Climate Change Mitigation

China has elevated the carbon peaking and carbon neutrality targets to a major national strategy. The targets of the strategy are fully consistent with the mitigation target in China’s NDCs. China is fully committed to achieving its mitigation target primarily through the following policy and regulatory mechanisms:

National economic and social development plans

The Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Vision 2035 (“14th Five-Year Plan”), adopted in 2021, has established a binding target of “reducing carbon dioxide emissions per unit of GDP by 18% by 2025 compared to the 2020 level”. Provincial governments have also integrated climate change into their 14th Five-Year Plans to break down and execute their specific emission control targets and tasks. The legal nature of these plans, which are not statutes or regulations, is controversial, but they are generally considered to be mandatory and binding, particularly for governments.

In order to achieve the targets outlined in the plans, China evaluates the performance of provincial governments in meeting greenhouse gas emission control targets. These assessments serve as a crucial criterion for the comprehensive evaluation of provincial government leaders, influencing their promotions, sanctions, appointments, and dismissals. Concurrently, provincial governments also assess lower-level governments in a similar manner.

The “1+N” policy system

China has established a “1+N” policy system for carbon peaking and carbon neutrality. “1” consists of the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy by the CPC Central Committee and the State Council, and the Action Plan for Carbon Dioxide Peaking Before 2030 by the State Council. “N” consists of various implementation plans for key areas and industries, as well as related supportive plans. These include implementation plans for key areas such as energy, industry, transportation, urban and rural construction, agriculture and rural affairs, pollution reduction, and carbon reduction. Implementation plans are also outlined for key industries such as coal, oil and gas, iron and steel, non-ferrous metals, petrochemicals, chemicals, and building materials. Additionally, supportive plans are in place for scientific and technological support, financial support, and statistical accounting. All provincial governments have also formulated their own regional carbon peaking implementation plans to ensure the fulfilment of the policy targets. The aforementioned policies are not statutes or regulations, but they are typically mandatory and binding, especially for governments.

Normative documents

China’s normative documents specifically applicable to climate change mitigation mainly include those related to the National Carbon Emission Trading Market and the National Trading Market for Voluntary GHG Emission Reductions (see 5.1 Carbon Markets). In addition, the Regulation on the Administration of Ozone-Depleting Substances (administrative regulations), which was amended in 2023, also requires the control of non-CO2 GHGs, such as HFCs.

Government Departments Affected by Climate Change Mitigation Policies

Provincial (autonomous region and municipal) governments, ministries, and commissions of the State Council, as well as institutions directly under the State Council, are all influenced by the aforementioned national plans and policies. This influence has prompted them to prioritise addressing climate change as an important consideration in their work.

Specific Mechanisms for Mitigating Climate Change

Carbon taxes – China has not yet imposed a carbon tax.

Emissions trading – China has established a carbon trading mechanism where mandatory carbon emissions trading and voluntary emission reduction trading coexist (5.1 Carbon Markets).

Carbon emission information disclosure – at present, China has implemented requirements for disclosing/reporting carbon emissions information for key greenhouse gas emitters participating in the carbon emissions trading market. In addition, per the Measures for the Administration of the Law-based Disclosure of Environmental Information by Enterprises, key pollutant discharging entities, enterprises subject to compulsory cleaner production examination, and listed companies and bond issuers that meet specific criteria are also obligated to comply with the legal disclosure and reporting requirements for carbon emission information. Statistical accounting and reporting of carbon emission information are essential for achieving the dual-carbon target, and the falsification of such information is subject to strict law enforcement.

Environmental permits – climate change mitigation is not yet a factor that needs to be universally considered for the issuance of environmental permits or authorisations. However, the MEE is striving to incorporate the assessment of climate change impacts into the environmental impact assessment for both planning and construction projects.

Regulatory Mechanisms for Climate Change Adaptation

China fully supports the achievement of climate change adaptation targets through various policy and regulatory mechanisms.

On the one hand, China’s 14th Five-Year Plan and some of the “1+N” policy documents contain policy and regulatory requirements for climate change adaptation. On the other, China has also issued planning and policy documents specifically applicable to climate change adaptation. These documents emphasise the need to enhance the capacity to adapt to climate change in cities, coastal zones, the Qinghai-Tibetan Plateau, other key ecological zones, and key sectors such as agriculture, forestry, grasslands, water resources, public health, and infrastructure. Additionally, they stress the importance of improving the capacity for climate change observation, monitoring, and early warning, as well as for risk assessment, disaster prevention, and mitigation. These documents are not statutes or regulations, but they are typically mandatory and binding, especially for governments. The following are examples.

• National Climate Change Adaptation Strategy, issued in 2013;
• National Plan on Climate Change (2014-2020), issued in 2014;
• Action Plan on Climate Change Adaptation for Cities and Action Plan on Climate Change Adaptation for Forestry (2016-2020), issued in 2016;
• National Comprehensive Disaster Prevention and Mitigation Plan (2016-2020), issued in 2017;
• National Climate Change Adaptation Strategy 2035, issued in 2022; and
• Notice on Deepening Pilot Projects for Building Climate-Resilient Cities, issued in 2024.

In addition, some provinces (autonomous regions, and municipalities) have issued provincial action plans for climate change adaptation, but the fulfilment of climate change adaptation targets has not yet been included in the assessment and evaluation of the heads of provincial governments.

Government Departments Affected by Climate Change Adaptation

The main government departments affected by the aforementioned plans and policies include the departments of environment and ecology, development reform, science and technology, finance, natural resources, housing and urban-rural development, transportation, water resources, agriculture and rural affairs, culture and tourism, health, emergency management, energy, meteorology, forestry and grassland, and the central bank.

Environmental Permits and Authorisations

Adaptation to climate change is not yet a factor to be considered in the issuance of environmental permits or authorisations, including in the ongoing carbon emission EIA pilot programme.

China’s Stance Regarding Article 6.4 of the Paris Agreement.

At present, China has not taken a clear position on whether it will participate or intends to participate in the carbon market under Article 6.4 of the Paris Agreement. However, it has actively participated in the negotiation process related to the international carbon market mechanisms under Article 6 of the Paris Agreement and has promoted the establishment of relevant market mechanisms.

With regard to the ever-expanding rule book on Article 6 and the work of the supervisory body under Article 6.4, China is currently concentrating on the construction and enhancement of its National Carbon Emission Trading Market and National Trading Market for Voluntary GHG Emission Reductions. It has not established a designated national body to deal with Article 6.4 of the Paris Agreement. However, since 2007, China has established the National Leading Group on Climate Change, Energy Conservation, and Emission Reduction, along with other climate change-related departments and institutions (see 2.4 Key Policy/Regulatory Authorities).

Carbon Markets and Regulatory Mechanisms in China

China’s carbon market consists of the National Carbon Emission Trading Market (the Mandatory Carbon Market) and the National Trading Market for Voluntary GHG Emission Reductions (the Voluntary Carbon Market). The two markets have their own focuses and operate independently. They are also complementary to each other and interconnected, together constituting the national carbon market system. The current administrative/management mechanism of the carbon market is primarily outlined in the Interim Regulation on the Administration of Carbon Emission Trading (an administrative regulation), the Measures for the Administration of Carbon Emissions Trading (for Trial Implementation) (a departmental rule), the Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading (For Trial Implementation) (a departmental rule), and other normative documents issued by the MEE, such as the Rules for the Administration of Registration of Carbon Emissions (for Trial Implementation), the Rules for the Administration of Trading of Carbon Emissions (for Trial Implementation), and the Rules for the Administration of Settlement of Carbon Emissions (for Trial Implementation), among others. However, the carbon market administrative/management mechanisms mentioned above are not operated under any national body designated in Article 6.4 of the Paris Agreement. Instead, they are managed by the competent ecological and environmental authorities, market regulation authorities, and other relevant departments of the State Council within their respective jurisdictions.

China allows legally established legal persons and other organisations in the country to participate in the voluntary carbon market in accordance with the Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading (For Trial Implementation). Projects that participate in the voluntary carbon market must meet the criteria of authenticity and uniqueness, and must fall also within the scopes supported by the project methodology issued by the MEE, and must commence construction after November 8, 2012. Entities participating in certified voluntary emission reductions trading must open an account in both the registration system and the trading system. They are required to validate and register voluntary GHG emission reduction projects in compliance with the law. Subsequently, they must verify and register the GHG emission reductions as China Certified Emission Reductions (CCERs) following the project registration. The CCER trading parties can utilise various trading methods such as listed agreements, block agreements, and one-way bidding, through the trading system in accordance with the rules.

China’s Voluntary Carbon Market was launched in 2012 and entered the trading phase in 2015. However, due to the limited participation in voluntary GHG emission reduction trading and the absence of standardisation in individual projects at the initial stage, the NDRC suspended the acceptance of filing applications for voluntary GHG emission reduction trading projects and emission reduction volumes in March 2017. Along with the introduction of the national carbon market and the incorporation of CCERs into the trading scope, there has been a sharp increase in demand for CCERs from GHG emission-control enterprises and voluntary emission reduction enterprises. In January 2024, the Voluntary Carbon Market was officially restarted.

Regulation of Carbon Markets and Information Disclosure

China strictly regulates both the National Carbon Emission Trading Market and the National Trading Market for Voluntary GHG Emission Reductions. For the National Carbon Emission Trading Market, ecological and environmental authorities oversee the identification of key GHG emission entities, the allocation of carbon emission allowances, the accounting, reporting, verification, and surrender of GHG emissions, as well as the registration, trading, and clearance of carbon emission rights.

For the National Trading Market for Voluntary GHG Emission Reductions, ecological and environmental authorities strictly supervise the development of voluntary GHG emission reduction projects through validation, registration, verification of emission reductions, registration of emission reductions, and trading of these projects. The market regulation departments conduct daily supervision and inspection of the validation and verification activities of third-party institutions in accordance with laws, regulations, and relevant provisions. They also investigate and penalise illegal acts.

For the disclosure of carbon market-related information, the MEE has established the National Carbon Market Information Network (click here for its website), where information about key emission entities, verification organisations and the completion and processing of carbon allowance surrender is disclosed. The network unifies and connects the National Carbon Trading Market Management Platform, the National Carbon Emissions Registration and Clearing System, and the National CCER Registration System.

In accordance with Article 2 and Appendix 1 of the Carbon Border Adjustment Mechanism (CBAM) Regulation, Chinese companies that directly or indirectly enter the EU market may be affected by CBAM. At present, CBAM applies to the relevant products in six industries: electricity, cement, fertilizer, iron and steel, aluminium, and hydrogen. Authorised declarants in the EU are subject to the CBAM, but, since the declarations mainly include embedded carbon emissions, the CBAM will indirectly impact third-country exporters and enterprises. In addition, the European Commission will decide whether to add more products or processes to the product life cycle based on the implementation of the transitional phase. The application scope of CBAM may be expanded in the future, impacting both upstream and downstream supplies along the production chain, thereby influencing China’s manufacturing and logistics industries. Therefore, for Chinese companies, the impact of CBAM includes not only export companies in the six industries during the transition period but also companies in their upstream and downstream supply chains. As the coverage of CBAM continues to expand, other industries may also be affected to some extent.

In response to CBAM, at the routine press conference of the MEE held in July 2021, Liu Youbin, the spokesperson of the MEE, mentioned that the CBAM is essentially a unilateral measure that unprincipledly expands climate issues into the trade field. This not only violates WTO rules but also fails to comply with the principles and requirements of the UNFCCC and the Paris Agreement. During the WTO’s review meeting on EU trade policy held in June 2023, China emphasised that the EU’s specific measures, such as CBAM, export controls, or other actions, should not harm the interests of other members, particularly developing countries. China calls on the EU to avoid taking unilateral actions that blatantly violate WTO rules.

In China, the Task Force on Climate-Related Financial Disclosures (TCFD) has influenced national policy and regulatory positions on climate change liability and reporting.

In December 2017, the 9th China-UK Economic and Financial Dialogue encouraged financial institutions in both countries to pilot environmental information disclosure work with reference to the TCFD’s recommendations. Subsequently, the two countries released the China-UK Climate and Environmental Information Disclosure Pilot Programme Working Group Action Plan. Ten financial institutions on both sides adopted the TCFD’s recommendations as the first group of pilots. In April 2024, under the unified deployment and guidance of the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange formally issued the guidelines for sustainability reports of listed companies (the “Guidelines”), which came into force on 1 May 2024. The Guidelines require that specific listed companies in China should disclose their annual sustainability reports for 2025, while other listed companies are encouraged to voluntarily disclose theirs. Among other things, the sustainability disclosure framework focuses on five aspects of disclosure: governance, strategy, impact, risk and opportunity management, and indices and targets, which is consistent with the TCFD recommended framework.

In terms of civil society, enterprises and financial institutions are increasingly valuing the TCFD recommendations as a reference basis for disclosing climate-related information. Statistics show that, by the end of 2022, a total of 61 organisations, including 26 financial institutions and 35 non-financial institutions, have claimed to support the TCFD disclosure recommendations in China. For example, the Bank of China has published green finance (TCFD) reports for two consecutive years since it became a supporter of the TCFD in 2021.

For investment and industry operational decisions, the influence of the TCFD is becoming increasingly significant. Financial institutions and investors are more inclined to utilise TCFD-based information to evaluate climate risks and opportunities for companies, which is crucial when evaluating investment projects. For example, in September 2022, Noah Holdings, in collaboration with Rankins ESG Ratings, Yicai Research Institute and SinoCarbon co-organised the first 2022 TCFD Climate-Related Financial Information Rating Conference and Seminar for Listed Companies in China. At the seminar, Rankins ESG Ratings announced the TCFD Climate-Related Financial Information Disclosure Rating Standard and released the 2022 TCFD Climate-Related Financial Information Rating Analysis Report for the reference of the relevant parties.

In China, there is no law that explicitly specifies that company directors can be held liable for climate change impacts on their company or of their companies.

With regard to infrastructure investment and/or financing that may have a negative impact on climate change, China has introduced a series of national policies to encourage green finance since 2007, and has put forward policy requirements that strictly limit the granting of credits and investments to clients with serious violations of laws and regulations and significant risks in relation to ESG. For example, the policies require that banks and insurance institutions should effectively identify and control environmental and social risks (including environmental and social issues related to climate change, etc) in their lending activities; strengthen credit and investment due diligence; and strictly limit credit and investment to the customers with a history of serious ESG violations and significant risks. The policies also require banks and insurance institutions to strengthen credit and investment fund disbursement management and post-investment management, in accordance with their customers’ ESG performance and risks. In 2020, five departments, namely the MEE, the NDRC, People’s Bank of China, the China Banking and Insurance Regulatory Commission (CBIRC) and the CSRC jointly issued the Guiding Opinions on Promoting Investment and Financing in Response to Climate Change, which proposes to support local authorities in formulating negative investment lists to curb high-carbon investments and proposes to accelerate the formulation of information disclosure standards for climate investment and financing projects, institutions, and funds. The document also proposes to promote the establishment of a climate information disclosure system in which enterprises make public commitments, disclose information in accordance with the law, and is under broad social supervision.

China has not yet enacted a specific law on climate change. Existing Chinese laws do not specify whether shareholders or parent companies can be held liable for climate change damages or breaches of climate change law.

In China, ESG reporting is a regulatory requirement for certain listed companies.

In April 2024, the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange formally published the guidelines for sustainability reports of listed companies, which came into effect on 1 May 2024. The guidelines stipulate that companies included in the sample companies of the SSE 180 Index, the SSE Science and Technology Innovation Board 50 Index, the SZSE 100 Index, the Growth Enterprise Index and companies listed in both China and abroad should disclose their 2025 annual sustainability reports for the first time by 2026. Other listed companies are encouraged to voluntarily disclose their reports. In particular, information on addressing climate change is included in the scope of the information disclosure.

In response to the first two international sustainability disclosure standards issued by the ISSB on “General Requirements for Disclosure of Sustainability-related Financial Information” and “Climate-related Disclosure”, the Ministry of Finance and nine other departments have established a cross-departmental working group. This group aims to evaluate the suitability of ISSB’s international standards for China, considering the sustainability disclosure practices of Chinese enterprises and the requirements of information users (such as investors, lenders, and regulators). The assessment focuses on determining the relevance of ISSB’s international standards in the Chinese context. Based on the aforementioned work, following the ISSB International Standards, the Ministry of Finance issued the “Corporate Sustainability Disclosure Guidelines – Basic Guidelines (Draft for Public Comment)” on 27 May 2024.

Regarding the Science Based Targets initiative (SBTi), as of January 2024, 346 Chinese enterprises have joined the SBTi. These enterprises may disclose information on their GHG emissions and their progress towards the targets through sustainability reports (or ESG reports).

In China, there are currently no statutory requirements for conducting climate change due diligence in M&A, financing and asset transactions. However, in practice, some companies conduct ESG-specific due diligence for investment and M&A purposes.

Buyers of shares/assets usually conduct climate change or ESG due diligence through document verification, personnel interviews, or by relying on third-party reports.

China has provided policy and regulatory support for the adoption of renewable energy technologies. At policy level, China has issued a series of renewable energy development plans as top-level designs, such as the 14th Five-Year Plan for Renewable Energy Development jointly issued by the NDRC, the National Energy Administration and other departments in October 2021. It proposes to continue promoting innovation and the application of renewable energy engineering technologies. At statutory level, the specific law supporting renewable energy technologies is the Renewable Energy Law, which includes a special chapter providing industrial guidance and technical support.

China’s policies and regulations support and encourage the adoption of renewable energy technologies through mechanisms such as Feed-In Tariff (FIT), renewable energy green power certificate (Green Certificate) programmes, the fully guaranteed purchase mechanism/national guarantee mechanism for renewable energy consumption, and tax incentives.

Feed-in Tariff (FIT)

In January 2006, the NDRC published the Trial Measures for the Administration on Prices and Cost Allocation for Electricity Generated from Renewable Energy, which outlines the FIT policies applicable to various renewable energy power generation technologies, such as wind power, biomass power, solar power, ocean power, and geothermal power.

The Green Certificate Programme

The Green Certificate is an electronic certificate with a unique identification code issued for green power generated from renewable energy power generation projects. It is the only proof for recognising green power generation and consumption. In 2017, China began piloting the voluntary trading of green certificates. In August 2023, the NDRC and other departments issued the Notice on Effectively Completing the Full Coverage of Renewable Energy Green Electricity Certificates to Promote Renewable Electricity Consumption, expanding the coverage scope of green certificates. At present, China is promoting the increase in the proportion of green power consumption among central and local state-owned enterprises, government agencies, and institutions. It is also exploring and advancing the integration and alignment of green certificates with the National Carbon Emission Trading Market and the National Trading Market for Voluntary GHG Emission Reductions as a means of promoting Green Certificate trading and the utilisation of renewable energy power generation technologies.

In 2019, the country established and enhanced the mechanism guaranteeing renewable energy power consumption to increase the proportion of renewable energy power generation in total power generation. This mechanism mandates that electricity sales (or consumption) by various market entities must meet the consumption amount, not falling below the minimum renewable energy power consumption responsibility in the provincial administrative region. The primary method for each market entity responsible for consumption to fulfil the consumption requirements is by purchasing renewable energy from power grid companies, power generation companies, or by generating renewable energy for self-use. Furthermore, it can offset its consumption by voluntarily subscribing to Green Certificates. In 2024, the NDRC issued the Regulations on the Supervision of Full Guaranteed Purchase of Renewable Energy Electricity to clarify the aforementioned mechanism at the statutory level.

Tax Incentives

The State Taxation Administration has introduced a series of tax incentives for the development and utilisation of renewable energy technologies. These incentives include the exemption of distributed photovoltaic power generation from the construction fund for major national water conservancy projects, exemption of renewable energy tariff surcharges, exemption of funds for the late-stage support of migrants in large and medium-sized reservoirs, exemption of funds for repayment of loans to the agricultural network, immediate refund of the value-added tax on wind power generation, exemption of some land used for hydroelectric power stations from urban land use tax, and enterprise income tax exemption for renewable energy projects.

At present, China’s policies and regulations mainly support renewable energy technologies that utilise the wind, solar, hydro, biomass, geothermal, oceanic and other renewable sources to generate electricity.

China is actively promoting the development of climate investment and financing domestically, welcoming all climate-friendly investments, and providing specific policy support. In 2020, five departments, including the MEE, jointly issued the Guiding Opinions on Promoting Investment and Financing in Response to Climate Change. The aim was to attract more social funds, including overseas funds, to support initiatives addressing climate change. This support is intended for both climate change mitigation and adaptation efforts, such as backing pilot demonstrations of carbon capture, utilisation, and storage.

In 2021, China initiated pilot programmes on climate investment and financing. In 2022, 23 cities and districts were selected as pilot zones to explore various investment and financing modes, organisational structures, service approaches and management systems. China supports international financial organisations and multinational corporations to conduct climate investment and financing operations in the pilot areas. Taking Guangzhou Nansha New District, one of the pilot districts, as an example, per the Implementing Rules for Several Measures to Promote the Development of Climate Investment and Financing in Guangzhou Nansha New District, the government will provide financial incentives for investment and financing institutions newly established or relocated to the Nansha New District. These institutions should primarily engage in climate investment and financing within China, meet specific conditions, and provide financial support for climate loans, climate funds, climate insurance, ESG bonds, and other related businesses.

At present, China has not specifically introduced relevant domestic policies or regulations pursuant to Article 6.8 of the Paris Agreement.