77Recently, the Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development issued by the Central Committee of the Communist Party of China and the State Council proposed to “improve the green power certificate trading system and strengthen the policy coordination of market-based mechanisms such as green power, green certificates, and carbon trading.”
The carbon trading market is one of the important policy tools for using market mechanisms to control and reduce greenhouse gas emissions. The national carbon emission allowance trading market went online for transactions in July 2021, and the national voluntary greenhouse gas emission reduction trading market was officially launched in January 2024, together forming the national carbon trading market system.
Vice President of the China Business Economics Society, Song Xiangqing, stated in an interview with the Securities Daily that the carbon trading market, as a critical means to promote green and low-carbon development, aims to guide the optimal allocation of carbon emission rights resources through price signals, reduce the overall social cost of emission reduction, and promote the efficient and sufficient development of green and low-carbon industries. In the future, as the national carbon trading market expands further and the participation and activity in the carbon trading market continue to increase, it will provide clearer price signals for emission reduction, thereby better leveraging this market mechanism to drive innovation and emission reduction actions required for low-carbon transformation.
Accelerating Transformation Through Market Mechanisms
By leveraging market mechanisms, emission reduction responsibilities can be solidified at the enterprise level, providing economic incentives for emission reduction, reducing the overall social cost of emission reduction, and driving green technological innovation and industrial investment. For this reason, the pace of China’s carbon trading market construction has not ceased, and today, China has built the largest carbon market covering greenhouse gas emissions globally.
China's carbon trading market consists of the national carbon emission allowance trading market and the national voluntary greenhouse gas emission reduction trading market. While each market focuses on different aspects and operates independently, they complement and connect with each other.
Specifically, the national carbon emission allowance trading market, which "set sail" in July 2021, has successfully completed two compliance cycles after more than three years of construction and operation, achieving its expected construction goals. This is reflected in four main aspects: the establishment of a relatively complete institutional framework, the construction of an infrastructure support system consisting of "one network, two institutions, and three platforms," a significant improvement in emission accounting and management capabilities, and a steady increase in carbon market vitality.
Data from the Shanghai Environment and Energy Exchange shows that as of August 12, the cumulative traded volume of carbon emission allowances in the national carbon market was approximately 469 million tons, with a cumulative trading value of about 27.326 billion yuan. Meanwhile, carbon prices have shown a steady upward trend, rising from 48 yuan per ton at the start to 91.83 yuan per ton on the closing day of August 12.
Regarding the voluntary emission reduction trading market, Pei Xiaofei, Director of the Department of Publicity and Education of the Ministry of Ecology and Environment and spokesperson, introduced at the regular press conference in July that the national voluntary greenhouse gas emission reduction market was officially launched in January 2024. Currently, the institutional framework has been constructed, and the window period for applying for emission reduction projects and voluntary emission reduction credits is about to open, encouraging a wider range of industries and enterprises to participate in carbon emission reduction actions.
In Song Xiangqing's view, the operation of the voluntary emission reduction trading market provides a legal basis for activities related to carbon emission rights trading, further improves market trading systems, protects the rights and interests of trading entities, and standardizes market behavior. China's carbon trading market will play a more active role in guiding all sectors of society to jointly participate in emission reduction and promoting the implementation of the country's "dual carbon" goals.
Market Expansion Expected to Speed Up
The carbon trading market plays a prominent role in accelerating the comprehensive green transformation of economic and social development, and the demand for further expanding the industry coverage of the national carbon trading market, enriching trading entities and products, is growing stronger.
The 2024 Government Work Report proposed to “enhance the statistical verification capability for carbon emissions, establish a carbon footprint management system, and expand the industry coverage of the national carbon market”; on May 10, the work conference on green financial services for the construction of a beautiful China, jointly convened by the People's Bank of China, the Ministry of Ecology and Environment, the National Financial Regulatory Administration, and the China Securities Regulatory Commission, pointed out that efforts should be made to promote the construction of environmental element markets, gradually expand the industry coverage of China's carbon market in stages, and improve the national voluntary greenhouse gas emission reduction trading market.
Song Xiangqing suggested that as the national carbon market gradually matures, it is recommended to further expand the industry coverage of the national carbon market, incorporating more mature industries such as steel and building materials into the national carbon emission allowance trading market, continuously strengthening data quality management, gradually implementing paid allocation of quotas, constantly enriching trading entities, trading varieties, and trading methods, and exploring feasible paths for carbon financial activities, fully leveraging the function of the carbon market to promote low-cost greenhouse gas emission reduction.
