China Tightens Power Sector Emissions Benchmarks for 2026

The updated guidelines lower the benchmark for conventional coal-fired units exceeding 300 megawatts to 0.7894 mtCO2/MWh, down from 0.7902 mtCO2/MWh. Smaller units and unconventional coal plants face similar reductions, though gas-fired power benchmarks remain untouched. These adjustments incentivize efficiency, as plants performing better than the threshold stand to generate a surplus of tradable allowances.

Despite the stricter regulatory environment, market sentiment remains tempered by profit-taking. Chinese Emission Allowance (CEA) prices on the Shanghai Environment and Energy Exchange settled at 94.40 yuan per metric ton on Thursday, reflecting a weekly decline of 4.12 yuan. For industrial sectors, the government continues to rely on intensity-based coefficients, with initial allocations for both power and industry set at 50% of the previous year’s verified emissions. Officials indicated that while free allocation remains the standard, preparations are underway to eventually integrate a paid component into the national scheme.