China, the world’s biggest source of greenhouse gas pollution, opened a national carbon emissions trading market on Friday, a long-awaited step aimed at fighting climate change.
The market turns the power to pollute into an allowance that can be bought and sold, and is part of an array of policies that the Chinese government is putting in place as it tries to demonstrate its commitment to significantly reducing carbon dioxide emissions in the coming decades.
Here is how the program works and what it could do.
The market is key to China’s climate ambitions.
4月,北京的一个巨型屏幕上播放着中国国家主席习近平出席美国领导的气候峰会的画面。习近平承诺在2060年以前实现碳中和。 Greg Baker/Agence France-Presse — Getty Images
China’s leader, Xi Jinping, has sought to cast his country as an environmentally responsible world power, and has pledged to tackle climate change. The new carbon market, which is immediately the world’s largest by volume of emissions, is the latest of Beijing’s efforts.
Last year, Mr. Xi made two signature commitments on climate. China’s emissions of carbon dioxide would peak before 2030, he vowed. It would also achieve carbon neutrality before 2060, he said, meaning the amount of carbon dioxide gas that China released into the atmosphere would be offset through methods like planting forests.
Mr. Xi’s pledges, if realized, could make a significant difference in the world’s efforts to fight climate change. An international pact aiming to limit global warming this century to below 2 degrees Celsius (3.6 degrees Fahrenheit), and to 1.5 degrees Celsius if possible, will not be feasible unless China and the other major powers act urgently to cut greenhouse emissions.
China has come under intense pressure at home and abroad to cut emissions and do more to reduce global warming since it overtook the United States as the biggest polluter around 2006. In 2019, China’s greenhouse gas output accounted for 27 percent of global emissions, more than the combined total of the next three biggest emitters — the United States, the European Union and India — according to the Rhodium Group.
自2006年前后取代美国成为全球最大污染国以来,中国在国内外都承受了减少排放和缓解气候变暖的巨大压力。根据荣鼎咨询(Rhodium Group)的数据,2019年,中国的温室气体排放量占全球的27%,超过了排在其后的三个最大排放方——美国、欧盟和印度——的总和。
Here is how carbon emissions trading works.
河津一家煤炭加工厂排出的烟雾和蒸汽。在中国的碳市场里,控制温室气体排放的责任由企业承担。 Olivia Zhang/Associated Press
These markets work by limiting the amount of carbon dioxide that companies can release, creating competition to encourage them to become more energy efficient and adopt clean technology.
Companies that cut their carbon output can sell their unused pollution allowances; those that exceed their emissions allowance may have to buy more permits or pay fines.
By auctioning allowances and progressively cutting the volume of pollution that companies are allowed to release, governments can push companies into a race to adopt carbon-cutting technologies.
Emissions trading can be a more efficient and flexible tool for cutting emissions than top-down administrative measures, Zhao Yingmin, a Chinese vice minister for the environment, said at a news conference in Beijing on Wednesday.
“It can place responsibility for containing greenhouse gas emissions on businesses, and can also provide an economic incentive mechanism for carbon mitigation,” he said.
China’s carbon market was years in the making.
淮北一处矿场里的工人正在分拣煤炭。碳交易市场只覆盖了供电供暖的煤炭和天然气厂。 Huang Shi Peng/Chinatopix, via Associated Press
The Chinese government started local trials of carbon trading over a decade ago. In a summit with President Barack Obama in 2015, Mr. Xi made establishing a national trading program a cornerstone of climate cooperation with the United States.
十多年前,中国政府开始了碳交易的地方试点。在2015年与贝拉克·奥巴马(Barack Obama)总统举行峰会会晤时,习近平表示,建立一个国家级交易机制将是中美气候合作的基石。
But the Chinese authorities have struggled to get the settings right for a national launch.
To make the market work, regulators must accurately measure emissions from factories and plants, then ensure that those polluters do not cheat by hiding or manipulating emissions data.
But that can be challenging in China, with its sprawling industrial base and relatively poor regulation. A firm from Inner Mongolia, a region of northern China, that is participating in the new market was already fined this month for falsifying carbon emissions data.
The Chinese government initially said the market could cover steel making, cement and other industries, as well as power plants. But it narrowed the scope to cover only coal and gas plants that supply power and heat — a sector that has fewer players and is easier to monitor. Other industries may be brought into the market in coming years.
“It’s now starting from the power sector, because it’s more mature in data quality and other settings,” Zhang Xiliang, director of the Institute of Energy, Environment and Economy at Tsinghua University, said in an interview. “But I think very quickly sectors like cement, electrolytic aluminum and steel will join.”
Even so, China’s coal and gas power sector is so large that the scheme already covers around a tenth of total global carbon dioxide emissions. Some 2,225 power plant operators — many of them subunits of China’s state-owned power conglomerates — were selected to trade on the platform run by the Shanghai Environment and Energy Exchange.
Until now, the biggest carbon emissions market has been Europe’s, followed by one in California. Eventually, these and other emissions trading initiatives may link up, creating a potential global market. For now, though, 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.
2月北京的空气污染。大多数专家预计,中国的碳交易项目还需要数年时间才能成熟到变为遏制排放的有效手段。 Carlos Garcia Rawlins/Reuters
In the first deal struck after the Chinese market opened on Friday morning, a company paid $1.2 million to emit 160,000 metric tons of emissions at about $8 a ton. One Chinese news outlet hailed the new market as a “significant milestone” in combating global warming.
“Carbon market prices will certainly rise,” Professor Zhang from Tsinghua said. “In my view, future allocations will be tighter, and the carbon price may rise to $15.”
But most experts expect it will take years before China’s program matures into an effective tool for curbing emissions.
Participating power plants have received free pollution permits to get them used to reporting data and trading. The Ministry of Ecology and Environment, which operates the scheme, has said it may introduce auctions for permits later on.
China’s trading program does not put a fixed ceiling on the carbon dioxide that a power producer can release; instead, it sets a limit on the amount of carbon for each unit of power generated. That looser approach means companies face less pressure to cut pollution, at least to begin with.
But the scheme could grow sharper teeth over time, especially if China brings in an emissions cap and steeper fines for exceeding pollution limits.
“Its role won’t necessarily kick in straightaway,” Jianyu Zhang, the chief representative of the Environmental Defense Fund China Program, said in an interview. “It’s impact will mainly be felt through planning for the whole power array, and it will bring out the cost of carbon.”
“我觉得碳市场对电力行业的影响应该是Far reaching(深远)的,不一定是能够发挥马上的作用,”美国环保协会(Environmental Defense Fund)中国项目的首席代表张建宇在接受采访时表示。“它影响的主要是我们对电力整个结构的规划,将碳成本显现出来。”