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How can China’s national carbon market contribute to reducing emissions?
(China Dialogue, 20 Aug 2021) As the system begins to set explicit carbon price for large power sector emitters, it still has to overcome some expected design and implementation challenges.
On 16 July, trading started on China’s national emissions trading system (ETS). This is the first nationwide explicit price on carbon, for now covering companies in the power generation sector.
With overarching regulation for the national ETS having entered force in February, and rules for the registry, trading and clearing of allowances released in May, China now has in place the key building blocks for trading in carbon allowances between large emitters. In its first compliance cycle (for emissions from 2019 and 2020), the ETS covers 2,162 power companies across the country, responsible for a total of over 4 billion tonnes of CO2 emissions annually.
The carbon price had been one of the most conjectured upon features of the new carbon market, with predictions ranging from under 38 yuan/tonne (US$5.85/tonne) to 49/tonne. On the opening day, trading started at 48/tonne and closed at 52.8/tonne, hitting the daily 10% upper limit on price variation. In the first two weeks of trading, about 6 million tonnes of allowances were traded at a value of about 300 million yuan. As of 5 August, prices were trading between 53–59/tonne.
China Dialogue, 20 Aug 2021: How can China’s national carbon market contribute to reducing emissions?
