China's domestic emissions reduction policy

China's unparalleled economic growth has brought with it a massive increase in fossil fuel consumption: China uses almost as much coal as the rest of the world put together. Unsurprisingly, its annual green- house gas emissions surpassed those of the US in 2006 (WRI, CAIT 2.0, 2014). Still, China's negotiators insist on the principle of “common but differentiated responsibility,” stating that industrialized nations have been polluting the atmosphere for the last 150 years and China and other developing countries should therefore have a lesser burden when it comes to reducing consumption of fossil fuels. The failure to include the world's largest emitters–China and the US amount to at least 42 percent of global emissions–into a binding agreement remains one of the major roadblocks of international climate change negotiations.

Interestingly, China's domestic policy is more ambitious than one would assume from its stance on the international stage. While its Copenhagen pledge to reduce its carbon intensity by 40–45 percent compared to 2005 by 2020 was a promising step in the right direction, it was merely a restatement of previously approved domestic policy. China's policy roadmap has included energy intensity targets for already more than a decade, with detailed breakdowns for different sectors and industries. These intensity targets allow continued economic growth, while addressing energy consumption and emissions. Consequently, China has so far not been willing to commit itself to an absolute cap (even assuming a rising trajectory) internationally, although domestically absolute caps on energy consumption or certain fuels are under discussion.

The 10th 5-Year Plan (2001–2005) for example contained an over- all energy intensity reduction target of 24 percent against the baseline year 2000. The target under the 11th 5-Year Plan (2006–2010) was a 20 percent reduction against 2005 levels, a target China barely managed to achieve, having to resort to drastic measures in the last year, such as cutting off electricity supply for factories which had used up their quota (see Box 8.1 “Forced shutdowns under the 11th 5-Year Plan”).

This chapter brings together all the previous ones. Based on the detailed presentation and analysis of the MRV requirements of so many different carbon pricing and management mechanisms – hereafter “carbon pricing mechanisms,” it synthesizes and compares how they answered to the five cross-cutting questions identified in the general introduction to the book:

1. • What are the MRV requirements?

2. • What are the costs for entities to meet these requirements?

3. • Is a flexible trade-off between requirements and costs allowed?

4. • Is requirements stringency adapted to the amount of emissions at stake (materiality)?

5. • What is the balance between comparability and information relevance?

MRV requirements across schemes

The first cross-cutting question – what are the MRV requirements? – is too large to be answered in a synthetic way. This section thus focuses on two components of this question that have a major impact on MRV costs: requirements pertaining to third-party verification and those pertaining to monitoring uncertainty.

Verification requirements are broadly similar across the board

Most carbon pricing mechanisms impose a verification of the reports by an independent third party. Verification requirements are broadly similar across carbon pricing mechanisms:

1. • the third party must be accredited by a regulator for GHG emissions audits and this accreditation tends to be sector-specific;

2. • the third party must assess whether the methods used and the reporting format comply with the relevant guidelines;

3. • the third party must assess the accuracy, i.e., the absence of bias, of the reported figures;

4. • the regulator is allowed to question the opinion of the auditor, but seldom does so;• the third party tends to be paid directly by the verified entity. Although this creates a potential conflict of interest, the risk of losing the accreditation is a much stronger incentive and keeps auditors from being complacent with their client (Cormier and Bellassen, 2013).