China’s national carbon market began trading this morning, Friday 16 July.
Initially covering 2,225 companies in the power sector, which together emit over 4 billion tons of CO2 each year, by 2025 the market will expand to include seven more industries, according to National Business Daily.
Companies are given annual emissions allowances, which they can trade with other companies – incentivising them to reduce emissions.
The first deal on the national carbon market this morning was priced at 52.78 yuan (US$8.16) per ton, much lower than the EU Emissions Trading System when it launched in 2005. Today, the EU price stands at $59 per ton.
There have been eight provincial pilot markets in China since 2013. Total allowances traded only reached about 480 million tons of CO2 equivalent, with a value of about 11.4 billion yuan (US$1.8 billion). Qi Kang, an expert on Shanghai’s carbon market, believes trading has been slow due to the low price of carbon and uneven regional development.
“Low carbon prices dampen companies’ enthusiasm to reduce emissions, while high prices overburden some high emitters” said Zhao Yingmin, deputy minister of the Ministry of Ecology and Environment. “Therefore, a reasonable price can not only demonstrate China’s determination and strength to achieve carbon neutrality, but also incentivise companies.”
Read our commentaries on the impact of the national carbon market and how China could ensure its success.