CARBON MARKET: ENVIRONMENT
NEWS: What is China’s carbon market and how does it
work?
WHAT’S IN THE NEWS?
China's carbon market consists of a mandatory emission
trading system (ETS) and a voluntary greenhouse gas (GHG) emissions reduction
trading market
China’s
Carbon Market Structure
- Mandatory ETS: Launched in July 2021,
covering over 2,000 power generation sector emitters.
- Voluntary Market (CCER): Allows offsetting 5% of
emissions with voluntary credits; relaunched in 2023.
ETS
Expansion
- ETS will include eight
sectors: power, steel, building materials, non-ferrous metals,
petrochemicals, chemicals, paper, civil aviation (75% of China’s total
emissions).
- Firms get certified emission
allowances (CEAs) based on government-set carbon intensity benchmarks.
- Surplus CEAs can be sold;
firms exceeding quotas must buy more.
Carbon
Pricing
- China’s ETS carbon prices
are lower than international markets but rise with reduced quota
allocations.
CCER
Market
- Voluntary system relaunched
in 2023, increasing demand and liquidity as more sectors enter ETS.
Global
Carbon Markets
- Originated under the Kyoto
Protocol (2000), offering emissions trading, joint implementation, and
Clean Development Mechanism (CDM).
- Under the Paris Agreement,
Article 6 provisions:
- 6.2: Bilateral emissions
reduction transfers.
- 6.4: Broader carbon markets
for trading reductions.
- 6.8: Non-market approaches for
achieving targets.
Source: https://indianexpress.com/article/explained/explained-climate/china-carbon-market-9567534/