Climate legislation in Asia: what the rules require of companies

China and India both run mandatory carbon markets that reach individual companies, not only national governments. China's national emissions trading scheme has operated since 2021 and, since the 2025 expansion into steel, cement and aluminium smelting, covers more than 60% of the country's CO2 emissions. India's Carbon Credit Trading Scheme sets legally binding emissions intensity targets for about 490 obligated entities. Scope, thresholds, reporting duties and published penalties for each are set out below, reviewed 12 August 2026.

Depth varies across this guide, deliberately. China and India get full sections: scope, thresholds, reporting duties and published penalties. Japan's GX-ETS, Singapore's carbon tax and ISSB adoption across the region are summarised at less depth, each with an official source you can open. Every scheme here is live and changing, so confirm anything you plan to act on with the regulator itself before it reaches a filing, a contract or a supplier requirement.

What does China's climate legislation require of companies?

China's binding obligation on companies sits in the national emissions trading scheme, which requires covered installations to monitor their emissions, report them and surrender allowances against them. The national commitments around it are policy direction rather than corporate duties: peak CO2 emissions before 2030, cut CO2 per unit of GDP by over 65% against 2005 levels, and reach carbon neutrality before 2060. In the 2035 NDC submitted to the UNFCCC on 3 November 2025, China committed for the first time to an absolute reduction, 7 to 10% below peak levels by 2035.

Two changes matter to anyone working from older guidance. The State Council's Interim Regulations on the Administration of Carbon Emission Trading took effect on 1 May 2024 and replaced the 2021 trial measures, raising penalties sharply. Coverage then expanded in 2025 beyond the power sector into steel, cement and aluminium smelting, under a Ministry of Ecology and Environment work plan published in March 2025.

How does China's national ETS work?

The China national ETS is an intensity-based cap-and-trade system. Allowances are allocated for free using output-based benchmarking, so the cap is not an absolute limit: it is the sum of the bottom-up allocations to every covered entity, adjusted for actual production levels. The March 2025 work plan that brought in steel, cement and aluminium smelting added about 1,500 key emitting units and around 3 billion tonnes of CO2e to what the market covers. Covered entities may use Chinese Certified Emission Reductions to offset a limited share of their verified emissions.

That design now has a published end date. Opinions issued in August 2025 by the General Office of the CPC Central Committee and the General Office of the State Council set 2027 as the point by which the national market should cover the main industrial emitting sectors, with absolute allowance caps applied first to sectors whose emissions are relatively stable. By 2030 the market is meant to run on an absolute cap, with free and paid allocation combined and the paid share rising over time.

What is the legislation timeline?

• 2021: the national ETS starts operating, under the National Measures for the Administration of Carbon Emission Trading (trial).
• May 2024: the State Council's Interim Regulations on the Administration of Carbon Emission Trading take effect, adding enforcement powers and much larger penalties.
• March 2025: the Ministry of Ecology and Environment publishes the work plan bringing steel, cement and aluminium smelting into the national carbon market.
• August 2025: central government Opinions set the timetable away from an intensity-based cap, 2027 for the first sectors to move to an absolute cap and 2030 for a mature market with a rising share of paid allocation.
• February 2026: the ministry's notice for the 2026 market year sets the operating calendar, from the annual report deadline through verification and allocation to allowance settlement.

Which companies are affected?

• Power generation, steel, cement and aluminium smelting. The 2025 expansion added about 1,500 key emitting units in the three industrial sectors to the power sector entities already covered.
• The inclusion threshold is annual direct emissions of 26,000 tCO2e or more. Power sector coverage includes combined heat and power plants, and captive power plants belonging to other sectors.
• Covered entities certify their monthly emissions data within 40 days of each month end and file an annual report for the previous year by 31 March. Provincial ecological and environmental authorities organise verification, due for 2025 emissions by 30 June 2026 in the power sector and 31 July 2026 in steel, cement and aluminium.
• Allowances for 2026 are pre-allocated from April, finalised by 30 September and settled by 31 December 2026.
• Petrochemicals, chemicals, flat glass, copper smelting, paper and civil aviation are expected to follow, and the August 2025 Opinions put 2027 on the market covering the main industrial emitting sectors. Treat them as pending rather than out of scope.

What are the penalties for non-compliance?

• Falsifying emissions data or an emissions report: a fine of five to ten times the illegal gains, or CNY 500,000 to CNY 2 million where there are no gains or the gains fall below CNY 500,000, under the 2024 Interim Regulations.
• Not putting a falsified report right after an order: 50% to 100% of the following year's allowance allocation can be withheld.
• Failing to surrender enough allowances: a fine of five to ten times the average market price in the month before the surrender deadline, applied to the shortfall. Under the 2021 trial measures the maximum was CNY 30,000.
• Refusing to correct the shortfall: the outstanding allowances are deducted from the following year's allocation, and production can be suspended for rectification.
• Verification and testing bodies that falsify data: five to ten times the illegal gains, or CNY 200,000 to CNY 1 million where gains are absent or below CNY 200,000, with a permanent ban from the work in serious cases.

What does India's climate legislation require of companies?

India's binding corporate obligation is the Carbon Credit Trading Scheme, which sets legally binding greenhouse gas emissions intensity targets for named industrial units. Its legal basis is the Energy Conservation (Amendment) Act 2022, and the scheme itself was notified in June 2023. The Bureau of Energy Efficiency published the Detailed Procedure for Compliance Mechanism under CCTS in July 2024. India's national commitments sit alongside it: emissions intensity 47% below 2005 levels by 2035, 60% of installed electricity capacity from non-fossil sources by 2035, and net zero by 2070, in the 2031 to 2035 NDC the cabinet approved in March 2026.

The CCTS is a conversion rather than a new build. It takes over from Perform, Achieve and Trade, the mandatory energy efficiency scheme covering more than 1,000 entities across 13 energy-intensive sectors, and turns that machinery into a carbon market. Intensity targets have been notified in two batches so far, in October 2025 and January 2026.

How does India's Carbon Credit Trading Scheme work?

The CCTS is an intensity-based baseline-and-credit scheme, not an absolute cap. Each covered unit holds a greenhouse gas emissions intensity target denominated in tCO2e per unit of product. Units that beat their target earn carbon credit certificates, each worth 1 tCO2e, and units that miss it buy and surrender certificates to cover the shortfall. Certificates trade on India's power exchanges under the Central Electricity Regulatory Commission (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations 2026, notified in March 2026, which make Grid Controller of India the registry and set a monthly trading frequency. Power exchanges need the commission's approval for their eligibility rules and price discovery mechanism. Boundaries are gate-to-gate: direct emissions, purchased electricity and heat, plus some Scope 3 in the form of imported and exported intermediary products. Offsets cannot be used in the compliance mechanism, and a separate voluntary crediting mechanism for entities outside it is under development.

What is the legislation timeline?

• 2022: parliament amends the Energy Conservation Act 2001, creating the legal basis for the scheme and for carbon credit certificates.
• June 2023: the Carbon Credit Trading Scheme is notified, establishing the National Steering Committee for the Indian Carbon Market and the administrator roles.
• July 2024: the Bureau of Energy Efficiency publishes the detailed compliance procedure.
• October 2025: the government notifies emissions intensity targets for aluminium, cement, chlor-alkali and pulp and paper, covering 282 obligated entities.
• January 2026: a further notification adds petroleum refineries, petrochemicals, textiles and secondary aluminium, another 208 entities, taking the total to 490.
• March 2026: the Central Electricity Regulatory Commission notifies the rules for buying and selling carbon credit certificates on the power exchanges.
• June 2026: the environment ministry issues a revised draft notification setting targets for 255 iron and steel units, open for objections.
• FY2025-26 and FY2026-27: the first two compliance years, with targets set against FY2023-24 baseline data. New intensity targets are announced every three years.

Which companies are affected?

• About 490 obligated entities. The October 2025 notification covered aluminium, cement, chlor-alkali and pulp and paper. The January 2026 notification added petroleum refineries, petrochemicals, textiles and secondary aluminium.
• Inclusion follows the Perform, Achieve and Trade thresholds, set by minimum annual energy consumption in tonnes of oil equivalent. Textiles start at 3,000 TOE, aluminium and pulp and paper at 7,500 TOE, chlor-alkali at 12,000 TOE, cement at 30,000 TOE and petroleum refining at 90,000 TOE.
• Iron and steel is not in force yet. The environment ministry issued a revised draft notification in June 2026 covering 255 units, with a 60 day window for objections. Treat steel as pending rather than exempt.
• Covered units report emissions annually to the Bureau of Energy Efficiency and their state designated agency. Reports are verified by a carbon verification agency accredited by the Bureau.

What are the penalties for non-compliance?

• A unit that misses its target buys and surrenders certificates to cover the gap, or pays environmental compensation set at twice the average price at which certificates traded during that compliance cycle, enforced by the Central Pollution Control Board.
• Because the compensation is priced off the market, the cost of missing a target is not fixed in advance. Notified targets currently run to FY2026-27.

Which other Asian rules reach individual companies?

Three, and this guide summarises them rather than setting them out in full. Japan's GX-ETS became mandatory for large emitters at the start of the 2026 fiscal year. Singapore taxes carbon at any facility above 25,000 tCO2e a year. And the ISSB climate standards, IFRS S1 and S2, are being written into listing rules and company law across the region on staggered timetables.

What does Japan's GX-ETS require?

Japan's emissions trading system, the GX-ETS, moved to its mandatory phase at the start of the 2026 fiscal year, under the amended GX Promotion Act enacted by the Diet in 2025. It binds companies rather than individual sites. A business is in scope if its direct CO2 emissions average 100,000 tonnes a year or more across the 2023 to 2025 fiscal years. The Ministry of Economy, Trade and Industry puts that at roughly 300 to 400 companies, about 60% of Japan's greenhouse gas emissions.

A covered company calculates its annual emissions, has them confirmed by a registered verification body, reports them to government, and holds allowances to match by 31 January of the following year. Falling short means paying a charge on the gap. J-Credits and Joint Crediting Mechanism credits can cover up to 10% of a year's actual emissions.

Who pays Singapore's carbon tax, and how much?

Singapore taxes any facility whose reckonable greenhouse gas emissions reach 25,000 tCO2e in a calendar year, under the Carbon Pricing Act. A facility between 2,000 and 25,000 tCO2e is a reportable facility: it files an annual emissions report but pays no tax. Seven gases count, carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, nitrogen trifluoride, hydrofluorocarbons and perfluorocarbons.

The rate is SGD 45 per tCO2e for emissions years 2026 and 2027, up from SGD 25 in 2024 and 2025, and the Ministry of Sustainability and the Environment has said it will reach SGD 50 to 80 per tCO2e by 2030. A taxable facility submits a monitoring plan for the National Environment Agency to approve, then files verified emissions reports annually. Eligible international carbon credits can offset up to 5% of taxable emissions each year.

Which Asian jurisdictions have adopted IFRS S1 and S2?

Most of the large Asian markets have adopted the ISSB standards or committed to them, on very different timetables. The IFRS Foundation's April 2026 update to its Advisory Council counts more than 40 jurisdictions worldwide that have decided to use ISSB Standards or are taking steps to introduce them. Its own jurisdiction profiles say where each Asian one has reached.

• Singapore: the climate requirements of the ISSB standards are going into the SGX listing rules. Listed issuers report from FY2025, starting with Scope 1 and Scope 2. Large non-listed companies, meaning annual revenue of at least SGD 1 billion and total assets of at least SGD 500 million, follow from FY2027.
• Hong Kong SAR: the Hong Kong Institute of Certified Public Accountants issued HKFRS S1 and S2, fully aligned with the ISSB standards, effective 1 August 2025 for voluntary application. The published roadmap expects mandatory application for listed publicly accountable entities from 1 January 2028.
• Japan: the Sustainability Standards Board of Japan issued its three standards on 5 March 2025, designed to give outcomes functionally aligned with the ISSB standards. On the IFRS Foundation's June 2025 profile, the Financial Services Agency's phased plan begins with Tokyo Stock Exchange Prime Market issuers above JPY 3 trillion of market capitalisation for years ending March 2027, then works down the market cap bands.
• Mainland China: the Ministry of Finance issued a Basic Standard in November 2024 and a climate standard on 19 December 2025, both on a trial basis and voluntary for now, with further standards due by 2027 and a full system targeted for 2030.
• Also on the IFRS Foundation's list for the region: Bangladesh, Malaysia, Pakistan, the Philippines, Sri Lanka and Chinese Taipei have finalised profiles, and South Korea, Thailand and Indonesia are at an earlier stage.

The effect on a buyer is the same in each case. More of the organisations you buy from or invest in will publish Scope 1, Scope 2 and, in time, Scope 3 figures against a defined standard rather than in a bespoke sustainability report, which makes the numbers comparable and worth asking for by name.

What does this mean for supply chain and portfolio reporting?

If you buy from or invest in organisations operating in China or India, some of them now hold verified, regulator-facing emissions data that did not exist five years ago. A Chinese power, steel, cement or aluminium entity above 26,000 tCO2e certifies monthly data and files an annual report that provincial authorities verify. An Indian unit in one of the notified sectors files an annual report verified by an accredited agency. Both are a better starting point than a survey, and both are worth asking for by name.

DitchCarbon provides verified emissions data for over 2 million organisations, so procurement, sustainability and finance teams can measure and act on supply chain and portfolio emissions from one source. Every figure carries its source and change history, and coverage gaps are shown rather than hidden. The DitchCarbon Portal calculator is verified to ISO 14064-3 at limited assurance by UL Solutions, renewed annually, so the output is audit-ready and auditable by your own third-party auditor. Where an organisation publishes nothing, spend-based emission factors fill the gap, and that emission factor methodology was independently assessed by Globus Thenken in August 2025 for Scope 3 categories 1 and 2. The reports sit on the trust centre.

See the coverage on your own supplier and portfolio list

Send us the organisations you buy from or invest in, and see what is already covered, including the entities regulated in China and India, with numbers you can defend within 2 weeks. A recent deployment reached about 60% of a large supplier base within 2 weeks. See how the data works.

If you are on the other side of the request, being asked for emissions data by a customer or an investor, claim your profile and answer once instead of filling in the same survey again.

Sources

Reviewed 12 August 2026. Every scheme on this page is changing, so check the regulator's own material before relying on a figure in a filing or a contract.

1. ICAP, China National ETS: icapcarbonaction.com/en/ets/china-national-ets
2. State Council, Interim Regulations on the Administration of Carbon Emission Trading, in force 1 May 2024: gov.cn
3. Ministry of Ecology and Environment, work plan for the national carbon market covering steel, cement and aluminium smelting, March 2025: mee.gov.cn
4. Opinions on advancing green and low-carbon transition and strengthening the development of the national carbon market, August 2025: gov.cn
5. Ministry of Ecology and Environment, notice on the work of the national carbon emissions trading market for 2026, February 2026: mee.gov.cn
6. UNFCCC, China's 2035 nationally determined contribution, submitted 3 November 2025: unfccc.int/documents/497392
7. ICAP, Indian Carbon Credit Trading Scheme: icapcarbonaction.com/en/ets/indian-carbon-credit-trading-scheme
8. Bureau of Energy Efficiency, Carbon Credit Trading Scheme, 2023: beeindia.gov.in
9. Bureau of Energy Efficiency, Detailed Procedure for Compliance Mechanism under CCTS, 2024: beeindia.gov.in
10. Greenhouse Gases Emission Intensity Target Rules, 2025: beeindia.gov.in
11. Press Information Bureau, government notifies greenhouse gas emission intensity targets for 208 more carbon-intensive industries, January 2026: pib.gov.in
12. Press Information Bureau, cabinet approves India's nationally determined contribution 2031 to 2035, March 2026: pib.gov.in
13. Ministry of Economy, Trade and Industry (Japan), the emissions trading system starting in fiscal 2026, January 2026: meti.go.jp
14. Ministry of Economy, Trade and Industry (Japan), Industrial Structure Council Emissions Trading System Subcommittee, GX-ETS design papers, December 2025: meti.go.jp
15. Ministry of Sustainability and the Environment (Singapore), Carbon Pricing Act: mse.gov.sg
16. Ministry of Sustainability and the Environment (Singapore), media release on the roll over of unutilised international carbon credit offset quota for emissions year 2025, 11 May 2026: mse.gov.sg
17. National Environment Agency (Singapore), greenhouse gas emissions measurement and reporting guidelines, part 1B, requirements for the taxable facility: nea.gov.sg
18. IFRS Foundation, update on the ISSB's activities, Advisory Council, April 2026: ifrs.org
19. IFRS Foundation, jurisdictional snapshot: Japan, 12 June 2025: ifrs.org
20. IFRS Foundation, jurisdictional snapshot: Singapore, 12 June 2025: ifrs.org
21. IFRS Foundation, jurisdictional profile: Hong Kong SAR, 12 June 2025: ifrs.org
22. IFRS Foundation, jurisdictional snapshot: People's Republic of China, 18 June 2026: ifrs.org