China has launched its long-awaited national carbon emissions trading scheme. Under the scheme, China’s power operators will have to buy emissions permits if their coal plant exceeds carbon intensity benchmarks. The market will initially only cover the thermal power industry, which accounted for about 40 per cent of China’s emissions in 2020.
A total of 2225 entities and operators have been registered on the new carbon market. They will be retrospectively handed pollution allowances for the market’s first compliance cycle which started 1 January.
China’s environment ministry said that the launch of the trading system was “an important starting point” towards the nation’s goal to peak emissions before 2030 and aim for carbon neutrality by 2060. It described the new market as “a major institutional innovation … to control and reduce greenhouse gas emissions and promote green and low-carbon development.”
However, experts have warned that these measures will do little to curb China’s growing emissions, and might even provide incentives for new coal. Unlike the European emissions trading scheme, the new market does not put a cap on carbon emissions. Instead, it imposes carbon intensity limits for generated electricity. Operators whose plant are below the benchmark will be able to sell their carbon allowances on the new market. Those that are above will be forced to buy additional quotas.
The rules are due to come into force on 1 February, with the first trading expected shortly after. It is anticipated that the scheme will initially put very limited financial pressure of coal operators.