By expanding beyond power generation, the market will increase its trading, diversity and liquidity, raising carbon asset value, writes Xu Nan
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A cement plant in Yunnan province. Work on bringing the steel, cement, and aluminium industries into China’s mandatory carbon market is speeding up (Image: Yibo Wang / Alamy)
China’s mandatory national carbon market launched in 2021 with the primary aim of encouraging companies to pay attention to their emissions. So far, only companies with large coal-fired power generation have needed to comply. But other sectors, such as steelmaking, are set to join soon. This is likely to be a very good thing for the market, and for China’s low-carbon transition.
The market has been running for three years, covering two compliance periods (for emissions in 2019-2020 and in 2021-2022). In July, Xia Yingxian, head of the Ministry of Ecology and Environment’s Department of Climate Change, said work was effectively complete on rules for the sectors to be included in the expansion, which would take place as soon as possible.
According to a July report on the national carbon market, the second compliance period saw carbon trades up 47% on the first, with trading volume up 125%. Xia said total carbon-emissions allowances allocated to companies for the second compliance period matched their actual emissions, in line with policy expectations.
