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Improving the National Carbon Emissions Trading Scheme to Support China's Climate Goals
Improving the National Carbon Emissions Trading Scheme to Support China's Climate Goals
Chinese
APR 2022
Report
Green Economics Power
Summary:
This report analyzes the design and early performance of China's national carbon emissions trading scheme (ETS), which launched in 2021 covering the power sector, and offers policy recommendations to strengthen it as a central pillar of China's decarbonization strategy. It recommends introducing a price collar (price floor and ceiling) to stabilize carbon prices and manage economic risks, expanding coverage to include cement, aluminum, and steel sectors, transitioning from an intensity-based to an absolute emissions cap, and gradually introducing allowance auctions through a consignment mechanism to improve price signals and market efficiency. It also emphasizes the importance of robust monitoring, reporting, and verification (MRV) systems, including leveraging existing air pollutant data to verify fuel combustion reports, increasing penalties for data fraud, and improving transparency. Beyond ETS design, the report highlights the need for policy coherence—particularly completing power sector reform to enable economic dispatch—and underscores the alignment between a stronger carbon market and China's broader economic strategy of fostering domestic innovation and competitiveness in clean technologies.
Suggested citation:
Chris Busch, Hu Min, Chen Meian. (2022). Improving the National Carbon Emissions Trading Scheme to Support China's Climate Goals. Energy Innovation, Institute of Finance and Sustainability, and Institute for Global Decarbonization Progress (iGDP).
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