Decoding China’s Updated Carbon Accounting Framework: Green Compliance Imperatives and Market Opportunities

China released a new Work Plan for Improving the Carbon Emission Statistics and Accounting System, an important supporting document for China’s dual carbon goals.
The Work Plan specifies that China aims to build an annual and interim reporting system for carbon emissions by 2025. The clear tasks and timelines make it urgent for businesses to develop internal carbon accounting capabilities.
Meanwhile, this also implies opportunities for certain green industry sectors, including low-carbon technology R&D, emission consulting, and carbon emission footprint calculation services.

On October 24, 2024, China released the Work Plan for Improving the Carbon Emission Statistics and Accounting System (hereinafter, the “Work Plan”), an important supporting plan aimed at achieving China’s dual carbon commitments. This Work Plan sets a cornerstone for the upcoming 15th Five-Year Plan (2026-2030) and China’s transition toward a green and low-carbon economy.

Announced by the National Development and Reform Commission (NDRC) and seven other departments, the Work Plan outlines primary goals and key tasks for the next phase. Among other targets, China aims to build:

A national and provincial annual and interim reporting system for carbon emissions and a national greenhouse gas emission factor database by 2025.
A comprehensive carbon emission statistics and accounting system by 2030.

Given the clear responsibilities and timelines specified in the Work Plan, rapid progress can be expected in the 2024-25 period. Businesses should develop internal carbon accounting capabilities and prepare for additional green compliance requirements.

In this article, we navigate the details of the Work Plan for China’s carbon emission statistics and accounting systems and explore potential impacts and opportunities for businesses.

Background: Building China’s carbon emission statistics and accounting system

In 2020, President Xi Jinping announced China’s intentions to expedite its voluntary carbon emissions reduction targets ahead of its pre-existing commitments and strive to reach peak carbon emissions by 2030 and carbon neutrality by 2060.

In February 2022, the State Council released the Guiding Opinions of the State Council on Accelerating the Establishment and Improvement of a Green, Low-carbon and Recycling Economic System (“Guiding Opinion”), which sets broader goals for China to transfer to a green economy.

A robust carbon emission statistics and accounting system is crucial for China’s dual carbon goals for several reasons:

Accurate measurement and reporting: To effectively manage and reduce carbon emissions, it’s essential to have accurate data. A comprehensive system ensures that emissions are measured consistently and reported accurately at both national and provincial levels.
Informed policy making: Reliable data allows policymakers to design and implement targeted strategies to reduce emissions. It helps in identifying the most significant sources of emissions and the sectors where interventions can be most effective.
Tracking progress: With clear and consistent data, China can monitor its progress towards reaching peak carbon emissions by 2030 and achieving carbon neutrality by 2060. This tracking is vital for assessing the effectiveness of policies and making necessary adjustments.
Business compliance and innovation: For businesses, a clear framework for carbon accounting helps in understanding regulatory requirements and encourages the adoption of greener practices. It also drives innovation as companies seek to reduce their carbon footprint and improve sustainability.

A well-developed carbon emission statistics and accounting system is foundational for China to achieve its ambitious dual carbon goals, ensuring that efforts are data-driven, transparent, and effective.”— Alberto Vettoretti, Managing Partner, Dezan Shira & Associates

China has been working on its carbon emission statistics and accounting system since 2022:

The 20th Congress of the Communist Party of China proposed the “improvement of the carbon emission statistics and accounting system.”
The Third Plenary Session of the 20th Central Committee emphasized the need to establish a new mechanism for transitioning from dual control of energy consumption to dual control of carbon emissions and to build a carbon emission statistics and accounting system.
In July 2024, the General Office of the State Council issued the “Work Plan for Accelerating the Establishment of a Dual Control System for Carbon Emissions,” which set new requirements for improving carbon emission statistics and accounting.
In September 2024, the market regulator (State Administration of Market Regulation), macro planner (NDRC), and environmental regulator (Ministry of Ecology and Environment) released the first-ever catalog of carbon emission measurement parameters, providing guidance on how to measure them.

Now, the Work Plan focuses on addressing critical shortcomings, further detailing tasks, solidifying responsibilities, and strengthening implementation. This will effectively promote the enhancement of carbon emission statistics and accounting capabilities across all levels, fields, and industries, improving the quality and timeliness of carbon emission data.

Objectives and timelines for building China’s carbon accounting system

According to the Work Plan:

By 2025:

Establish a national and provincial annual and interim reporting system for carbon emissions.
Create and periodically update a national greenhouse gas emission factor database, enhancing capabilities for measurement, detection, monitoring, and analysis of carbon emissions.

By 2030:

Complete a comprehensive carbon emission statistics and accounting system.
Significantly enhance carbon emission management capabilities for key energy-consuming and emission-emitting entities.
Improve the product carbon footprint management system.
Ensure carbon emission data effectively supports carbon emission control requirements across all levels, sectors, and industries.

Over the next decade, these frameworks will evolve into a sophisticated system that not only aligns with international standards but also enhances China’s internal carbon monitoring and control capabilities. Ultimately, the Work Plan will build the institutional capacity required to meet the carbon control demands of China’s net-zero commitments, making it a significant move toward sustainable growth and environmental responsibility.

Key tasks set in the Work Plan

As an important supporting document for establishing the dual control system for carbon emissions, the Work Plan focuses on serving local carbon assessments, industry carbon management, corporate carbon management, project carbon evaluation, and product carbon footprints. It outlines 23 specific tasks across 8 key areas.