China’s New Carbon Market, World’s Largest: What You Need to Know

China, the world’s largest source of greenhouse gas pollution, opened a national carbon emissions trading market on Friday in a long-awaited step towards tackling climate change.

The market turns polluting power into an appropriation that can be bought and sold and is part of a series of policies the Chinese government has put in place as it tries to demonstrate its commitment to significantly reduce carbon dioxide emissions in the coming decades. .

Here’s how the program works and what it can do.

The market is key to China’s climate goals.

China’s leader, Xi Jinping, tried to portray his country as an environmentally conscious world power and promised to fight climate change. The new carbon market It will immediately become the world’s largest volume of emissions, the last of Beijing’s efforts.

Last year, Mr. Xi made two signature commitments on climate. He promised that China’s carbon dioxide emissions would peak before 2030. would also obtain carbon neutrality before 2060He said it means that the amount of carbon dioxide gas released by China into the atmosphere will be balanced by methods such as planting forests.

Mr. Xi’s promises, if realized, could make a significant difference in the world’s efforts to combat climate change. one international agreement Aiming to limit global warming to below 2 degrees Celsius (3.6 degrees Fahrenheit) this century, and to 1.5 degrees Celsius if possible, will not be possible unless China and other major powers act urgently to reduce greenhouse emissions.

China has come under intense pressure at home and abroad to do more to reduce emissions and reduce global warming. crossed the United States As the biggest pollutant around 2006. In 2019, China’s greenhouse gas production accounted for 27 percent of global emissions; that’s more than the next three biggest emissions combined (US, European Union and India). Rhodium Group.

Here’s how carbon emissions trading works.

These markets work by limiting the amount of carbon dioxide companies can emit, creating competition to encourage them to be more energy efficient and adopt clean technology.

Companies that cut carbon production can sell their unused pollution allowances; Those who exceed emission permits may have to obtain more permits or pay fines.

By auctioning off allocations and gradually reducing the volume of pollution companies are allowed to release, governments can push companies into the race to adopt carbon cutting technologies.

China’s deputy environment minister, Zhao Yingmin, said emissions trading could be a more efficient and flexible tool to reduce emissions than top-down administrative measures. Press conference in Beijing Wednesday.

“It can put the responsibility on businesses to limit their greenhouse gas emissions and also provide an economic incentive mechanism for carbon reduction,” he said.

China’s carbon market has been under construction for years.

The Chinese government began domestic carbon trading trials more than a decade ago. In Summit with President Obama In 2015, Mr. Xi made establishing a national trade program a cornerstone of climate cooperation with the United States.

But Chinese officials struggled to get the settings right for a national launch.

For the market to function, regulators must accurately measure emissions from factories and plants and then ensure that these pollutants do not cheat by hiding or manipulating emissions data.

However, this can be difficult in China, with its expanding industrial base and relatively weak regulations. A newly marketed firm from Inner Mongolia, a region of northern China, is already fined this month to falsify carbon emission data.

The Chinese government initially said the market could include steelmaking, cement and other industries, as well as power plants. But it narrowed it down to include only coal and gas plants that provide power and heat – an industry with fewer players and easier to monitor. Other sectors may be launched in the coming years.

“It now starts from the energy sector because it is more mature in data quality and other settings,” Zhang Xiliang, director of the Institute of Energy, Environment and Economics at Tsinghua University, said in an interview. However, I think sectors such as cement, electrolytic aluminum and steel will join very quickly.”

Even so, China’s coal and gas power sector is so large that the plan is already covers one-tenth total global carbon dioxide emissions About 2,225 power plant operators, most of them subdivisions of Chinese state-owned energy companies, have been selected to trade on the platform operated by the Shanghai Environment and Energy Exchange.

So far, the largest carbon emissions market has been in Europe, followed by California. Eventually, these and other emissions trading initiatives could combine to create a potential global market. But for now, international investors or financial firms will not be allowed to buy into China’s carbon market.

It may take years for the market to achieve results.

In the first deal after the Chinese market opened on Friday morning, a company paid $1.2 million to emit 160,000 metric tons of emissions, about $8 per tonne. A Chinese news organization’s new market “important milestone” in the fight against global warming.

“Carbon market prices will definitely increase,” said Professor Zhang from Tsinghua. “In my view, future allocations will be tighter and the carbon price could rise to $15.”

But most experts think it will take years before China’s program becomes an effective tool for reducing emissions.

Participating power plants received free pollution permits to get used to reporting and trading data. The Ministry of Ecology and Environment, which runs the program, said it could then open a tender for the permits.

China’s trade program does not set a fixed ceiling on the carbon dioxide that an electricity generator can emit; instead, it sets a limit on the amount of carbon per unit of power produced. With this looser approach, companies face less pressure to reduce pollution, at least initially.

But the plan could come in sharper dents over time, especially if China imposes an emissions cap and higher penalties for breaking pollution limits.

“Her role will not come into play immediately” Jianyu ZhangThe chief representative of the Environmental Defense Fund China Program said in an interview. “The impact will be felt mainly through planning for the entire power array and will drive up the carbon cost.”

joyful contributed to research.