China issues 2026 carbon allowance plan for steel, cement, aluminum sectors

The plan, released on September 2, also covers allowance allocation for the power sector for 2025 and 2026. It sets out the sectors covered, quota calculation methods, allowance distribution, and compliance arrangements under China's national emissions trading system.

For steel, cement and aluminum producers, allowances will continue to be allocated free of charge under an emissions-intensity-based approach, in line with the policy used during the initial phase of the market's expansion. The three sectors entered China's national carbon market in 2025.

The MEE said quota-setting will take account of China's greenhouse-gas control targets, the path to carbon peaking and neutrality, economic conditions, historical emissions, market needs, and the quality of emissions data.

The ministry also said the scheme will gradually be coordinated with capacity-replacement and output-control policies. It called for tighter carbon-emissions controls on non-compliant and obsolete capacity, as well as captive power plants.

The 2026 plan applies to steel, cement and aluminum-smelting companies listed as key emitters in the national carbon market. Steel and cement producers will be covered for direct carbon dioxide emissions from fossil-fuel use, industrial processes and carbon-containing products, while indirect emissions from purchased electricity and heat are excluded. Aluminum smelters will also be covered for tetrafluoromethane and hexafluoroethane emissions.

Edited by Vivian Yang, yangzhenqi@mysteel.com