In a pandemic year, China and the rest of Asia push ahead on carbon markets

(China Dialogue, 14 Apr 2021) China’s carbon-intensity-based cap needs to shift to an absolute cap to provide better market predictability for participants in its emissions trading system

Despite the economic challenges posed by Covid-19, the past year was marked by a growing number of pledges from countries to reach carbon neutrality or net-zero emissions, and policy developments to achieve those goals.

For many Asian countries, the direction points toward emissions trading systems (ETSs) as a pillar of climate policy. Many have taken critical steps to launch, enhance and develop carbon markets in the past year, the Emissions Trading Worldwide Status Report 2021 shows. The report produced annually by the International Carbon Action Partnership, shows that China’s launch of what is now the world’s largest ETS has nearly doubled the share of global emissions covered by an ETS to 16%.    

We anticipate this interest in carbon pricing, and particularly carbon markets, to grow as countries look for tools to help them transition to more sustainable economies and reach their climate goals, especially those adopting net-zero targets.

Effective carbon markets can help countries reach their climate neutrality goals in a cost-efficient manner. The pre-determined limit on emissions under an ETS provides covered sectors with certainty on how far they need to abate emissions, so countries, cities and other jurisdictions can work backwards from their climate targets when setting the cap. 

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China Dialogue, 14 Apr 2021: In a pandemic year, China and the rest of Asia push ahead on carbon markets