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China’s national carbon market is about to launch

(China Dialogue, 29 Jan 2021) With the new market set to open on 1 February, experts offer a take on how it may impact China’s industries and emissions trajectory.

China’s national carbon market will start operating on 1 February, as mandated by a key regulatory document. Although it will take time for the pricing to be meaningful, eventually the system is likely to have a substantial impact on investment decisions.

“Measures for the Administration of National Carbon Emissions Trading” (hereafter “Measures”) appeared earlier this month, 5 years after the 2015 joint statement on climate change between President Xi and then US president Barack Obama established a cornerstone for the carbon market to move forward. It lays out how carbon emissions “allowances” are to be allocated, how trading should be conducted and how measurement and verification should be done. It also represents the culmination of many years of speculation among industry players, environmental advocates and the international community.

As the Measures were issued by the Ministry of Ecology and Environment (MEE) they carry lower legal authority than that of a State Council regulation. But a ministry-level ordinance is considered the fastest way to trigger the early operation of an ETS. It is likely to play a transitional role until higher-level legislation is developed. Last month, Vice Minister Zhao Yingmin of the MEE also announced that it will push for a Climate Change Law, which may fill this higher-level role.

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China Dialogue, 29 Jan 2021: China’s national carbon market is about to launch