By Wang Ke and Li Siyang, Sustainable Development Research Institute for Economy and Society of Beijing, School of Management and Economics of Beijing Institute of Technology

National carbon emissions trading market

On July 16, 2021, China opened a national carbon emissions trading market, which currently applies to power generation industry’s more than 2 000 firms – more specifically, referring to power companies (including enterprise-owned power plants of other industries) that, in any year from 2013 to 2019, discharged 26 000 tons of carbon dioxide equivalent and had comprehensive energy consumption of around 10 000 standard coal.

The more than 2 000 firms mentioned above, with combined carbon emissions exceeding 4.5 billion tons of carbon dioxide, shall not participate in local pilot carbon emissions trading markets anymore, and shall submit carbon emissions quotas by December 31, 2021 (95% of submission shall be finished by December 15, 2021). Within the specified time, 99.5% of firms submitted the quotas for 2021, the first submission after they were brought into the national carbon emissions trading market.

Trading prices fluctuated around RMB50/t in July 2021, fell to RMB40/t and rebounded to RMB50/t in December 2021. Enterprises were not enthusiastic at the beginning. However, trading volume surged in November and December 2021, and cumulative volume reached 179 million tons at the end of 2021, resulting in a turnover rate of 3%, still far lower than the EU’s 417%. As for trading manners, block deal is the most important one, accounting for 83% of trading volume during July-December 2021. Listed transaction took up the remaining 17%.

Pilot carbon emissions trading markets

The National Development and Reform Commission issued Notice on Establishing Pilot Carbon Emissions Trading Markets in October 2011. Seven pilots markets in Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong and Shenzhen involved more than 2 900 enterprises by December 31, 2021, with combined emissions quotas of around 8 billion tons.

With regard to quantity and amount of trading, the top three were Guangdong market, Hubei market and Shenzhen market, and the last one was Chongqing market, which started trading later than the other six. Average trading price of Beijing market was the highest, reaching RMB56.42/t, far exceeding the lowest of RMB18.28/t of Chongqing market. Tianjin and Shanghai markets were similar in terms of opening time, quantity and amount of trading, but average trading price of Shanghai market was higher, reaching RMB30.71/t, next only to RMB56.42/t of Beijing market.

Outlook of national carbon emissions trading market in 2022

While helping firms lower costs of emissions reduction and propelling transition to low-carbon development, the national carbon emissions trading market will help the nation halt the rise of carbon emissions by 2030 and reach carbon neutrality by 2060.

     The national carbon emissions trading market will be improved in many aspects, like expanding scope to building materials and steel industries in 2022, covering eight energy-intensive industries by 2025, bringing in institutional investors during 2022-2023 to make trading prices more reasonable and stimulate circulation of carbon emissions quotas, etc. In addition, carbon trading products will be diversified by gradually adding derivatives (e.g. options and futures). This will help enterprises avoid risks from price fluctuation and will meet need of different participants. The government will speed up formulation of carbon tax related policies, another measure to reduce carbon emissions. To realize carbon neutrality, carbon emissions quotas will come under closer scrutiny. China’s national carbon emissions trading market – the world's largest by volume of emissions – will strengthen cooperation with global counterparts, and meanwhile play a role in the world.