China’s Carbon Market Stabilization: Key Regulations and Future Prospects
China’s carbon market stabilization is becoming a critical step towards carbon neutrality as the Ministry of Ecology and Environment (MEE) introduced new regulations. These new regulations invite feedback to improve carbon trading strategies before nationwide implementation.
Key Measures for Carbon Emission Trading
The MEE also introduced the National Carbon Emission Rights Trading Management Measures and the National Carbon Emission Rights Registration Transaction Settlement Management Measures. These documents mark the first set of regulations since the national carbon market launched in 2017. Companies emitting more than 26,000 metric tons of carbon dioxide annually will participate in the market.
Li Gao, Director of the Department of Climate Change, confirmed that additional industries like steel, cement, and chemicals will join during the 14th Five-Year Plan.
The Role of the National Carbon Market
China’s carbon market works through market mechanisms to reduce greenhouse emissions. This system is crucial for meeting the country’s carbon neutrality targets. Following a successful pilot phase, the market will expand across the nation.
Since 2011, seven provinces and cities have been part of pilot programs, involving 2,837 key emitters and over 1,000 non-compliant organizations. By the end of August, total trading volumes exceeded 406 million metric tons, worth over 9 billion yuan. The local markets have successfully reduced both emissions and emission intensity.
A Decade of Carbon Market Development
Each Five-Year Plan over the past decade has laid the groundwork for the national market. The upcoming Five-Year Plan aims to include more industries and focus on carbon neutrality by 2060. Stronger targets will limit coal consumption and boost renewable energy development.
Li Jin, Assistant General Manager of the Shanghai Environment and Energy Exchange, shared that Shanghai’s carbon trading system is ready. After three years of preparation, it awaits national approval to launch.
Challenges and Future Prospects
While the pilot programs have been effective, experts note differences between the pilot and national markets. As a developing country, China’s carbon emissions are expected to grow, making the market system more complex. Unified management will be essential due to the diversity of industries involved.
Li Jin pointed out the need for a pricing mechanism that reflects the true costs of emission reductions. During the pilot phase, offline transactions dominated, while online trading remained limited. Information gaps between entities further complicated trading.
Enhancing Transparency and Efficiency
Duan Maosheng, Director of the China Carbon Market Research Center, stressed the need for transparent data. Some regions did not disclose enough information, making it hard to evaluate the results of carbon trading. Going forward, authorities must provide more data on emissions and activities to ensure oversight.
Moving Forward with the National Carbon Market
The carbon market will be key in controlling greenhouse gas emissions. Establishing a clear pricing system will attract financial institutions to invest in green and low-carbon projects. He Jiankun, Director of the Climate Research Institute at Tsinghua University, noted that China’s emissions are still increasing, so the system must be tailored to the country’s specific needs.
He Jiankun also urged faster development of the national carbon market. Improving emission reporting and encouraging compliance from industries are critical steps. As new sectors such as petrochemicals and metal processing join the market, energy efficiency will improve across consumption and generation.