To strengthen the governance of its rapidly growing carbon emissions trading market, China has unveiled a set of new rules aimed at preventing the falsification of carbon emissions data and penalizing offenders, officials said.

Carbon trading allows companies to buy and sell permission to release a specific amount of carbon dioxide, helping them manage emissions better and encouraging efforts to reduce carbon footprints.

The Interim Regulation on the Management of Carbon Emissions Trading, which was introduced on Jan 25 as Premier Li Qiang signed a decree of the State Council, will take effect starting on May 1. It marks the first time that China is establishing a dedicated legal framework for this market. Prior to this, the management of this market relied solely on departmental rules.

The development of a dedicated administrative regulation for carbon emissions trading has been closely watched over the past few years.

In April 2019, the Ministry of Ecology and Environment released a draft of the regulation for public feedback. It underwent several rounds of revisions over the past five years before it was finally unveiled.

The regulation, which focuses on preventing and penalizing the falsification of emissions data, places responsibility on key emission units for the veracity and accuracy of their annual emission reports, said officials from the ministries of justice and ecology and environment. These units are required to disclose information to the public and retain all original records.

Technical service institutions testing greenhouse gas emissions are required to comply with national technical specifications and are prohibited from issuing false reports or engaging in fraudulent acts, the officials said.

Competent departments of ecology and environment may conduct on-site inspections, with strict penalties for fraud, including production suspension, cancellation of relevant qualifications and prohibition from corresponding businesses.

The Ministry of Ecology and Environment will oversee the carbon emissions trading and related activities, and propose greenhouse gases to be covered by the trading, which is currently limited to carbon dioxide. Provincial authorities will compile the annual list of key emission units based on specified conditions.

Launched in 2011 as a pilot program, China's national carbon market began trading in July 2021. It covered an average annual carbon dioxide emission of about 5.1 billion metric tons, accounting for over 40 percent of the country's total emissions, the Ministry of Ecology and Environment said.

As of the end of 2023, the national carbon emissions trading market covered 2,257 power generation enterprises.

In an interview with China Business News, Xu Huaqing, director of the National Center for Climate Change Strategy and International Cooperation, described the recently unveiled regulation as a milestone marking a new era of the rule of law for China's carbon emissions trading market.

"The next step is to actively implement the data quality management requirements of the regulation, continuously improve the quality of carbon emissions data, and provide support for the healthy operation and sustainable development of the national carbon emissions trading market," Xu was quoted as saying.

He called for the establishment of a top-level design for data quality management, accelerated release of institutional documents, and enhanced external supervision of data quality management.