China's ETS will cover steel, cement and aluminium. Emissions coverage will rise to about 60%

In March 2025 China formally expanded its national emissions trading system to three industrial sectors: the production of steel, cement and electrolytic aluminium. As a result the ETS will cover about 60% of national emissions instead of about 40% in the power sector alone. The sources give different dates: ICAP indicates that the Ministry of Ecology and Environment (MEE) published the plan on 20 March (the State Council approved it in mid-March), while Latham & Watkins says the MEE issued it on 26 March 2025.

The road to expansion

The MEE put the draft expansion out for public consultation in the first days of September 2024; the consultation closed on 19 September 2024. The system for the power sector started in July 2021. According to OPIS, during the consultation the price of a CEA allowance was 89.98 yuan per tonne (about USD 13).

Scope of the expansion

According to ICAP and Latham & Watkins, about 1500 new entities, emitting about 3 billion t of CO₂e in total, enter the system; after the expansion the ETS is to cover about 3700 entities and about 8 billion t. The inclusion threshold is 26,000 t of CO₂e a year. Steel and cement are covered only for CO₂, and in aluminium smelters also CF₄ and C₂F₆. Indirect emissions (from purchased electricity) are excluded. Entities that previously took part in the regional pilot systems move to the national system.

How allowances are allocated

Allowances in 2024 are allocated free of charge, and for 2025–2026 according to emission intensity benchmarks in relation to output, without a hard cap. Phase 1 (2024–2026) serves to familiarise participants with the system and improve data quality. According to Latham & Watkins, from 2027 the MEE plans a refinement stage with a cap on total emissions, limiting the number of allowances allocated; the plan does not provide for auctions. The first compliance deadline for the new sectors (2024 emissions) falls on 31 December 2025.

What this changes for waste and biogas

The sources we opened contain no information on counting biogenic fuels (e.g. biomethane) as zero-emission in the new sectors — this is a detail to check in the implementing acts.

What this means for Poland/Europe

The expansion covers sectors that compete with European producers of steel, cement and aluminium, but the system remains based on intensity benchmarks, not on an absolute cap. The scale of the market effect will be decided by allowance prices in China and the tightening of benchmarks after 2027.