China opened the world’s largest carbon-trading market (SCMP) today after originally pledging to do so ahead of the 2015 signing of the Paris Agreement on climate change. The market is limited to the country’s energy sector, which is responsible for some 40 percent of China’s carbon emissions (FT) and 15 percent of global emissions.
Rather than set a cap on total emissions from the sector, as carbon markets in the European Union and Canada do, China issued free allowances to companies based on previous years’ performances. There will likely be stricter caps in the future, but their scope has yet to be determined (WSJ). Officials have suggested that the cement, aluminum, and steel sectors will be added to the program next year. In the first transaction on China’s exchange, a ton of carbon was priced at around $8, compared to the $59–$70 prices in the European system. Beijing says its exchange will help the country reach peak carbon emissions by 2030 and carbon neutrality by 2060.
“The jury is still out on China’s new emissions-trading program. But this is still pretty amazing. A few years ago, the argument was that the West might control carbon but China would never sign up. Now China has a cap-and-trade scheme,”
“The Chinese are just doing what the Europeans did for the first phase of the [European carbon exchange], which is to treat it as a trial phase where the rules are relaxed to get buy-in from companies,” TransitionZero’s Matt Gray tells the Financial Times.
