On Friday, China officially created the world’s largest carbon market, after launching a national carbon emission trading scheme (ETS).
This new initiative aims to help cut and control CO2 emissions in the country and promote the development of low-carbon technologies. Although planning started already a few years ago, China launched its ETS almost right after announcing its long-term carbon goals.
One of the goals set by the Chinese government is for the country to achieve climate neutrality by 2060, and peak emissions before 2030.
Currently, China is the world’s number one greenhouse gas producer, with emissions almost twice the amount of those produced by the second-place US. Hence, the carbon emission trading scheme will now be one of the primary China’s climate change policies supporting the achievement of these goals.
Initially, the new ETS will cover over 2,200 power companies that produce roughly 40% of China’s CO2 emissions, and more sectors are said to be included as time goes by. Each company will receive a fixed amount of emissions allowances based on its site and the type of energy it produces. And these allowances can be bought and sold on the trading scheme.
One difference between China’s ETS and most other carbon trading systems in the world is that there will be no absolute emissions cap at launch. Instead, there will be an adjustable cap that changes over time based on the actual levels of production.
Another significant difference is the much lower carbon price under China’s ETS compared to that on other carbon markets.
Despite this, however, many market analysts and market observers are confident this launch of China’s ETS will increase the demand for environmentally friendly and carbon neutral products and supplies.