Quantcast
Climate

5 Things to Know as China Launches the World’s Largest Carbon Market

By Diane Regas

China has announced the launch of a national emissions trading system that will become the world's largest and most consequential environmental program, fulfilling a commitment of President Xi Jinping and setting up China to meet or even exceed its commitment to the Paris climate agreement.


The nation is moving deliberately, gradually phasing in and ramping up this carbon market, a proven way to limit and reduce climate pollution. It's expected to eventually be 10 times larger than the successful emissions trading system in California, which took more than six years to develop and launch.

China is stepping into a leadership void after the Trump administration decided to withdraw the U.S. from the Paris climate accord. There is still much to be done in the coming months to ensure China's program succeeds, including synchronizing it with other needed policies. But if it does, it could position the country of 1.4 billion to exceed its goals—and bring the rest of the world along.

When the first phase of the system is fully implemented, it's expected to cover 3.5 billion metric tons of carbon pollution from more than 1,700 companies in the power sector. That is roughly 39 percent of China's total emissions, making it the largest carbon market in the world.

Here are five things you should know about China's market, and why it's such a huge deal for our climate.

1. China is Motivated

China's current Five-Year Plan, which guides the country's economic and social development between 2016 and 2020, specifically calls for this carbon market. It also sets new targets for carbon and energy intensity for the economy—as well as the first-ever targets for total energy consumption.

By planning for moderate economic growth and by shifting the economy away from heavy industry—while at the same time capping greenhouse gases—China may, in fact, be able to peak emissions well ahead of its 2030 goal if it continues to ramp up these efforts.

The country is also motivated by a crippling air pollution problem. In addition to cutting climate pollution, the carbon trading system will reduce particulate matter and other pollutants that contribute to 1.6 million deaths annually.

2. China is Learning From Earlier Markets Abroad

With several large carbon markets already up and running in other countries, China is taking good notes. The nation's leaders understand that safeguards designed to protect market integrity must be in place for the market to perform, something Europe's now-successful market had to learn the hard way.

It must be functional, transparent, efficient and subject to strict oversight. But China also still needs to nail down a host of specific program design elements.

A partial list of the most pressing questions include the geographic scope of the market, which sectors will be covered, how the allocations will be made, the nature of the monitoring and verification system, the role of offsets and the nature of the enforcement mechanisms.

In our effort to support the Chinese government, Environmental Defense Fund (EDF) will continue to offer practical recommendations on how China can harvest the lessons, seize opportunities and overcome challenges associated with the new market—all while slowing energy demand and accelerating the transition to cleaner energy sources.

We bring insights from our decades of work helping to design, implement and evaluate emissions trading systems in the U.S. and the European Union—as well as from our 25-plus years on the ground in China.

By taking advantage of best practices, China will have a leg up as it designs its own, unique market.

3. China's Pilot Markets Gave Nation a Jumpstart

China's seven carbon trading pilots, which EDF continues to assist, are in full operation. These markets are already capping more than a billion tons of carbon dioxide in areas covering 250 million people.

Pilot participants have been learning from each other's experiences in anticipation of the national roll-out. The pilots' experiences will help inform the development of an innovative and efficient national system, for example when it comes to guiding government intervention to manage price volatility.

4. China Understands That Enforcement is Key

Strengthening enforcement and transparency is critical for building confidence in the market and in the country's ambitious climate goals. That's why EDF has helped train more than 39,000 Chinese environmental enforcement officers in recent years.

We have mounted an accelerated effort on the ground in China. Our mission: to provide technical assistance, analysis, training and support to those who will build, administer and manage the new carbon market.

We are also working with the Chinese government to improve the regulatory enforceability of market regulations

5. China Will Hold Polluters Accountable

An effective trading system offers enterprises flexibility on how to comply. It also makes it abundantly clear that violations will result in penalties that make non-compliance cost-prohibitive.

When these signals are clear, financial and environmental objectives come into alignment—prompting industry to minimize fines, invest in reduction measures and monetize green investments.

Our China team is working with Chinese partners to evaluate the effectiveness of penalties under the nation's new environmental law and translate those lessons to the new carbon market.

Notwithstanding the work that remains to be done, we are confident this new mechanism can reduce emissions from the world's most populous nation, delivering on and surpassing its commitments under the Paris climate accord.

China is showing positive action—and the rest of the world is watching.

Show Comments ()

EcoWatch Daily Newsletter

Sponsored
Popular
Michigan Department of Health and Human Services Director Nick Lyon, seen here speaking to the press about the Flint water crisis in 2016, will be the highest ranking official to stand trial over the public health disaster. Brett Carlsen / Getty Images

Judge Orders Michigan Health Director to Face Trial Over Flint Water Crisis Deaths

Michigan Department of Health and Human Services Director Nick Lyon will be the highest ranking official to go to trial so far as a result of an investigation into the Flint water crisis, The Associated Press reported Monday.

Judge David Goggins ruled Monday there was probable cause for Lyon to stand trial for involuntary manslaughter in the deaths of Robert Skidmore and John Snyder that prosecutors say were due to a Legionnaires' disease outbreak that Lyon was aware of a year before he alerted Michigan's governor, Michigan Live reported. Lyons is also charged with misconduct in office.

Keep reading... Show less
Politics
Coal-fired power plant near Becker, Minnesota. Tony Webster / Flickr / CC BY-SA 2.0

Trump's 'Dirty Power Plan' Could Cost More Than 1,000 Lives a Year

The U.S. Environmental Protection Agency (EPA) unveiled on Tuesday its long-anticipated replacement of the Obama-era Clean Power Plan. The new coal pollution rules will increase planet-warming carbon pollution and could cost more than a thousand American lives each year, according to the EPA's own estimates.

EPA Acting Administrator Andrew Wheeler released the "Affordable Clean Energy Rule" today under President Trump's directive. The new plan encourages efficiency improvements at existing coal plants to ensure they operate longer and allows states to weaken, or even eliminate, coal emissions standards. That's a clear difference from former President Obama's plan, which was aimed at phasing out coal and transitioning to cleaner power sources to avoid dangerous climate change.

Keep reading... Show less
Health
Two workers in protective gear scrape asbestos tile and mastic from a facility at Naval Base Point Loma in California. NAVFAC / Flickr / CC BY 2.0

Why Asbestos Is Still a Major Public Health Threat in the U.S.

Reports surfaced this month that the U.S. Environmental Protection Agency (EPA) had proposed a significant new use rule (SNUR) for asbestos in June, requiring anyone who wanted to start or resume importing or manufacturing the carcinogenic mineral to first receive EPA approval.

Keep reading... Show less
Animals
Rklfoto / Getty Images

Bipartisan Group of Lawmakers Wants to End EPA’s Cruel Animal Testing

By Justin Goodman and Nathan Herschler

A bipartisan group of lawmakers in Congress recently pressed the U.S. Environmental Protection Agency (EPA) on its "questionable" and "dubious" animal tests. The lawmakers' demand for information on "horrific and inhumane" animal testing at the EPA comes on the heels of a recent Johns Hopkins University study that found that high-tech computer models are more effective than animal tests.

Keep reading... Show less
Sponsored
Climate
Wikimedia Commons

Strongest, Oldest Arctic Sea Ice Breaks Up for First Time on Record

The Arctic is warming at a rate twice as fast as the rest of the globe, and now the region's thickest and oldest sea ice—also known as "the last ice area"—is breaking up for the first time on record, the Guardian reported Tuesday.

The breakage has opened up waters north of Greenland that are normally frozen-solid even in the peak of summer.

Keep reading... Show less
Energy
Climate Justice Edmonton

These Giant Portraits Will Stand in the Path of Trans Mountain Pipeline

By Andrea Germanos

To put forth a "hopeful vision for the future" that includes bold climate action, a new installation project is to be erected along the controversial Trans Mountain pipeline expansion route to harnesses art's ability to be a force for social change and highlight the fossil fuel project's increased threats to indigenous rights and a safe climate.

Keep reading... Show less
Sponsored
Popular
A worker inspects recycled plastic in a plastics factory. Getty Images

The Plastic Waste Crisis Is an Opportunity to Get Serious About Recycling

By Kate O'Neill

A global plastic waste crisis is building, with major implications for health and the environment. Under its so-called "National Sword" policy, China has sharply reduced imports of foreign scrap materials. As a result, piles of plastic waste are building up in ports and recycling facilities across the U.S.

Keep reading... Show less
Adventure
Aaron Teasdale

The One Thing Better Than Summer Skiing

By Aaron Teasdale

"There's snow up here, I promise," I assure my son Jonah, as we grunt up a south-facing mountainside in Glacier National Park in July. A mountain goat cocks its head as if to say, "What kind of crazy people hike up bare mountains in ski boots?" He's not the only one to wonder what in the name of Bode Miller we're doing up here with ski gear.

Keep reading... Show less
Sponsored

mail-copy

The best of EcoWatch, right in your inbox. Sign up for our email newsletter!