19 December 2017

China’s carbon market is finally unveiled

Chinese officials have provided updates on the country’s long-anticipated carbon cap-and-trade scheme, which aspires to be the biggest in the world.

During a briefing in Beijing on Tuesday, Zhang Yong, Vice Chairman of National Development and Reform Commission announced that the carbon market will initially involve only the power sector, contrary to previous plans to include China’s 8 biggest industries: electricity, chemicals, petrochemicals, construction, steel, nonferrous metals, paper, and aviation.

Due to a lack of accurate emissions data, the scope was narrowed down to only include power companies where emissions information is easier to collect.

However, the country’s carbon market will still be bigger than the European Union’s equivalent. It will cover approximately 4 billion metric tons of emissions with more than 1,700 companies participating.

The logic will follow existing carbon cap-and-trade schemes, where the biggest corporate polluters will buy credits from companies that don’t emit all their carbon allocation credits. This way, companies will be encouraged to reduce emissions in order to sell unused carbon credits.

For now, only companies that emit more than 26,000 tons of carbon per year will be included in the market, although, the threshold will decrease in the future.

The ultimate goal is to cover more than 7,000 companies, which in total emit more than 3 billion tonnes of greenhouse gases. If this goal is met, it will turn the Chinese carbon market into the biggest in the world.

Currently, the programme is focusing on cutting emissions from coal-fired power plants to encourage power companies to accelerate the shift from coal to natural gas and renewable energy sources.

Mr. Zhang Yong did not reveal when the carbon trading scheme will launch, although it is expected that it will be fully functional by 2020.

Former US Vice President Al Gore welcomed the news,  saying: “China’s carbon trading system is yet another powerful sign that a global sustainability revolution is underway”.

“With the top global polluter enacting policies to support the Paris Agreement and transition to a low carbon economy, it is clear that we’re at a tipping point in the climate crisis”, he added.

According to a survey conducted by China Carbon Forum in July, the average carbon price is projected to be 74 yuan ($11,5), per carbon tonne in 2020, double the 38 yuan ($5.75) estimation in 2017.

The country entered the final stage of the scheme’s preparation last July, attempting to incorporate 7 provincial pilot schemes into a nationwide one.

During that announcement, Chinese officials had pledged that the scheme will be operational by November 2017, meaning that it already faces significant delays. 

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