China Launched Nationwide Carbon Emission Trading System
According to ChinaDaily, China started the world’s largest carbon trading system on Tuesday, December 19th, sending strong signals that it plans to use the market as a key policy tool to curb emissions and also is keeping its Paris Agreement commitments.
The nationwide carbon market, which is built upon seven pilot programs implemented since 2013, will be open only to the power generation sector during its early phase, according to the National Development and Reform Commission.
Still, it is expected to exceed the European Union’s market, with more than 1,700 power generation enterprises producing 3.3 billion metric tons of carbon expected to be involved.
China will not introduce financial products such as carbon futures in the early stage as some other countries did because speculative behavior will do more harm than good in encouraging actual carbon reduction, according to Jiang Zhaoli, deputy director of the commission’s Department of Climate Change.
The initial benchmark for market inclusion is set at 26,000 metric tons of carbon or above a year. Firms involved that plan to emit more carbon should reduce emissions or buy spare credits from other companies, and those with extra allowances can sell or keep them for future use.
While creating the market is a milestone, much needs to be done to make it a success in coming years.
Transparency and public participation will be crucial for it to be an important incentive for carbon reduction, and improvements will be needed for a stronger legal basis, a more stringent cap and better allocation.
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