CHINA’S environment ministry is asking large industrial polluters to tighten their emission reporting, as it adopts the procedures necessary to expand its national carbon market and prepare Chinese industry for the European Union’s carbon tax.

Factories releasing the equivalent of more than 26,000 tons of CO2 a year across seven key industries will need to verify their 2022 data by December, according to a document posted on the ministry’s website Wednesday.

The industries include aluminum, cement, steel, petrochemicals, chemicals, paper and aviation, all of which are slated to join China’s carbon market by 2030 and some as early as next year.

The ministry is centralizing an annual reporting process that was previously handled locally, in a bid to help exporters meet the requirements of the EU’s Carbon Border Adjustment Mechanism (CBAM), which began data collection this month and formally launches in 2026.

The ministry said aluminum, cement and steel — industries covered in the first phase of CBAM — will need to complete their data verification by September from next year, earlier than the other sectors.

China’s carbon market currently covers just power firms. By highlighting those three sectors, the ministry is likely signaling their inclusion will be prioritized.

Expanding the market is an important step toward meeting China’s goal of peaking nationwide emissions before the end of the decade.

More broadly, measuring emissions, and aligning how they’re reported across regions, is crucial to efforts to rein in global warming and facilitating trade.

Delivering a robust reporting system will help China “tackle the challenges from CBAM, making enterprises more prepared for the EU tariff,” said Qin Yan, lead carbon and power analyst at the London Stock Exchange Group.

Carbon costs in the EU are far higher than in China, creating one of the biggest obstacles to alignment.

There are workarounds, however. For industries like steel, Chinese firms “have a variety of production lines with products of different level of emissions-intensity,” said Qin.

Carbon reporting would allow exporters to ship “greener products to the EU and the dirtier ones to other markets without carbon tariffs.”

The steel industry has long been a bugbear for China’s international trade partners. Talks are ongoing as to whether it should be subject to joint EU-U.S. action to tackle excess production and reduce carbon emissions.

The document also lays out a stricter regime for what constitutes zero-emission power. The only deductions allowed from a company’s emissions would be clean energy derived from captive plants that aren’t connected to the grid.

That’s likely to be controversial because it means green energy certificates purchased by companies to offset their emissions will no longer be a valid method of reducing their carbon footprints. The green certificate program was expanded as recently as August to include more renewable power sources. (SD-Agencies)