Carbon Emission Trading in China

Carbon emissions trading is a central pillar of government policies worldwide to reduce emissions. Trading systems for carbon emissions already exist, for instance on a European level with the EU Emissions Trading System (EU ETS). The Chinese government committed to reduce the nation’s carbon intensity of the economy by 40-45 percent by 2020 and 60-65 percent in 2030. Late 2017 they announced a Chinese ETS will be introduced to support these targets. But what is the current status of the trading system?

The China Carbon Forum publishes a yearly report on the development of a carbon emissions in China. Today, they presented the 2018 edition of their research at the Embassy of the Netherlands in Beijing. The survey of the China Carbon Forum amongst professionals shows that many expect the Chinese ETS will mature in the coming years, becoming fully functional by 2025. Respondents also expect that this will cause prices for emission rights to rise by almost half. As a result of this, it is expected that ETS will directly influence investment decision making in the future. While currently only 34% of respondents believe decisions are affected by carbon emissions trading, this increases to 75% in 2025.

Such numbers are increasingly important, with China’s commitment to the Paris Agreement. The Chinese ETS system is expected to have a big impact, explains Marc Allessie, Director of the Dutch Emissions Authority: “The development of carbon markets in China providing a clear price signal will be of great importance for building carbon markets worldwide. ETS as a market instrument will continuously be improved as witnessed by the recent EU ETS reform and the start of the national ETS in China. Success of the China ETS will be beneficial to the worldwide fight against climate change.”