China Debuts National Carbon Trading Market

China moves to restrain its greenhouse gas emissions.

After successfully piloting eight regional carbon markets for the past eight years, China launched its national carbon-trading market on July 16, which will eventually take over the transactions of the regional markets.

The Shanghai-based national carbon-emissions trading platform operates like the Shanghai Stock Exchange and Shenzhen Stock Exchange regarding trading hours, daily trading limits and a 10-percentage point cap of daily trading-price changes. The Shanghai United Asset and Equity Exchange and the Shanghai Environment and Energy Exchange oversees the new market’s operations.

The main purposes of the carbon-emission trading platform are to enable carbon-credit trading and establish similar financial instruments, such as those in the US and EU, and help China achieve its carbon-neutrality goal by 2060. China’s national carbontrading market started from coal and gas energy plants, and will expand to cover eight industries—including cement, electrolytic aluminum, steel and chemicals—within the next five years.

Over 2,000 power-generation companies joined as the first participants of the national carbon-trading market’s national emissions trading scheme (ETS), which looks to put a price on greenhouse-gas emissions in order to incentivize companies to reduce their emissions.

An ETS functions as a tool for international adoption to reduce greenhouse-gas emissions and will likely establish a platform for future international standards alignment and international trading market establishment. Total estimated annual carbon emissions of these 2,000 companies are 4.5 billion tons, which makes China ETS market the largest in the world for the time being.

Compared with the current carbon price of EU ETS ($49.78 per ton) and California cap-and-trade ($17.94 per ton), China’s ETS carbon trading price, which closed at $7.89 per ton on its first day of trading, has a long way to go. Regardless, the establishment of the Chinese national carbon-trading market is a significant milestone for the global climate change movement, given the fact that China is the world’s largest emitter of greenhouse gases.