23 November 2016

China to open first national carbon market

China is planning to open a national carbon market next year, and the consequent scale of this market is expected to enable emissions reductions from 2020.

According to experts, the market is particularly important as it will be the first of its kind to be set up at a national scale.

The market is expected to be in the range of 3-5 billion tonnes of carbon allowances per year in the beginning, which is a lot more than the EU-ETS scheme – currently the largest carbon market in the world with two billion tonnes of allowances.

Last year, 80 per cent of all carbon trading worldwide happened on the EU market, but the introduction of a Chinese carbon trading market could change this.

The new market will only initially apply to eight sectors – petrochemicals, chemicals, building materials, steel, ferrous metals, paper-making, power-generation and aviation – as announced by the National Development and Reform Commission (NDRC).

Participation in the market will be compulsory for companies in the above sectors that use more than 10,000 tonnes of standard coal equivalent (TCE) of energy each year.

More than 7,000 firms - representing half of all of China’s emissions - qualify.

The NDRC started the process of allocating the carbon allowances last October and this will end by June 2017, according to Deputy Head of NDRC’s Climate Change Department Jiang Zhaoli.

The launch prices will be set as the average of the prices on China’s seven trial carbon markets (about 30 yuan per tonne) – between 1.2 and 8 billion yuan ($0.17-1.16 billion) of over-the-counter trading yearly.

Other products will be introduced on the new carbon market after 2020 including carbon futures, and the market trading is expected to expand to 60 to 400 billion yuan ($7-58 billion) per year.

Launched after only two years of preparation in 2013, seven smaller-scale regional carbon trading trials are currently running in China in developed eastern areas and less affluent inland areas, including 2,000 companies with 120 million tonnes allowances.


This article was written according to and changes were made to the original version.

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