Greenhouse Gas Emission Cap-and-Trade Programmes: the Chinese Incarnation

Abstract

The article offers an overview of China’s national cap-and-trade system for greenhouse gas emissions launched in July 2021. Although generally in line with the design of similar systems (e.g., EU ETS) at their early stages (focus on coal- and gasfired power plants, free allocation of allowances), China’s ETS features a few distinctions. Notably, regulations provide for an increase in allocated allowances in certain cases and a fixed fine on installations emitting in excess of 120% of their allowance, while gas-fired plants are not sanctioned at all. The article presents the bottom-up allowance calculation method used by the regulator for various types of installations and engages with the China Certified Emission Reductions scheme, suspended in 2017 and expected to be relaunched in the near future – if with a limited industry scope covering forestry, renewable energy and methane utilization projects. The prospects of China launching an international carbon exchange and granting access to foreign buyers and sellers are also discussed.

Keywords

• climate change
• cap-and-trade systems
• emission trading systems
• carbon markets
• carbon credits
• carbon offsets
• china
• brics