China’s carbon market not yet fit for purpose

Announcement of the scheme is encouraging, but it will not be effective until an absolute cap is placed on emissions

China’s announcement in early January that it will launch a nationwide emissions trading system (ETS) in February is evidence the country is gradually shifting into a low-carbon transition. Yet experts say the new market will not cut greenhouse gases (GHGs) in its initial guise. The new ETS will begin by covering the power sector alone before adding further industry sectors after two years, according to the government statement. Nonetheless, from the start the market will be the world’s largest ETS, more than twice the size of Europe’s system. But, crucially, it will not immediately place an absolute cap on emissions, as ETSs do in Europe and the US. Instead, China will set benchmarks for co