Expanding the Coverage of the National Carbon Emissions Trading Scheme
Chinese
APR 2022
Report
Green Economics Industry
Summary:
This report examines the challenges and policy options for expanding China's national carbon emissions trading scheme beyond the power sector to include additional industries such as cement, aluminum, steel, chemicals, and others. It identifies information gaps—particularly the lack of detailed data on diverse industrial processes and trade exposure—and concerns about international competitiveness as key obstacles to expansion. To overcome these barriers, the report recommends a three step approach: first, introducing a price collar (price floor and ceiling) to manage economic risks and address competitiveness concerns; second, simplifying allocation benchmarks by reducing the number of technology specific benchmarks to the minimum feasible per product category; and third, highlighting the alignment between ETS expansion and China's broader economic strategy of fostering domestic innovation and competitiveness in growing global clean technology markets. The report also includes a case study on green hydrogen to illustrate the innovation and market opportunities that ETS expansion can catalyze, arguing that the economic benefits—though often overlooked—warrant greater attention from policymakers and industry stakeholders.
Suggested citation:
Busch Chris, Hu Min, Chen Meian. (2022). Expanding the Coverage of the National Carbon Emissions Trading Scheme: Challenges and Countermeasures. Energy Innovation, Institute of Finance and Sustainability, and Institute for Global Decarbonization Progress (iGDP).
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