Two days after the EU announced its new carbon emission reduction plan, China launched its long-awaited emissions trading system on Friday (July 16), which seeks to reduce greenhouse gases that cause climate change and achieve carbon neutrality by 2060. The key tool of and.
The plan was co-sponsored with China, the world’s largest carbon emitter, and aims to play a global leadership role in the climate crisis before the important UN summit in November.
China praised it for laying the foundation for becoming the world’s largest carbon trading market and forcing thousands of Chinese companies to reduce pollution or face severe economic blows.
The plan was launched a few days after the EU announced its detailed plan to achieve carbon neutrality by 2050.
However, the limited scale and effectiveness of China’s original emissions trading program still have profound problems, including low pollution prices.
More broadly, analysts and experts say that more needs to be done if China is to achieve its environmental goals, including peak emissions by 2030.
Ten years ago, China first announced its national carbon market plan, but progress has been slow due to influential coal industry lobby groups and policies that prioritize economic growth over the environment.
The plan will set a pollution ceiling for large power companies for the first time and allow companies to purchase pollution rights from other companies with lower carbon footprints.
According to data from the International Energy Agency, the market will initially cover 2,225 large power producers, whose fossil fuel combustion produces approximately one-seventh of global carbon emissions.
These generators accounted for 30% of the 13.92 billion tons of global warming gas emitted by Chinese factories in 2019.
Citigroup estimates that it will purchase 800 million US dollars worth of credit this year, which will increase to 25 billion US dollars by the end of the decade.
This will make China’s trade plan approximately one-third the size of the European market, which is currently the largest market in the world.
The scope of the plan was initially expected to be much larger, covering seven areas including aviation and petrochemicals.
Low ambition
But Lauri Myllyvirta, chief analyst at the Center for Energy and Clean Air Research, said the government has “lowered its ambitions” as economic growth is given priority in the slowdown caused by the pandemic.
“China’s coal, cement, and steel production are all increasing because the government has invested billions of dollars in energy-intensive industries to promote growth after the pandemic,” Myllyvirta said.
“Regulations to limit emissions will disrupt this growth model.”
Another concern of environmentalists is that China’s pollution is very low.
On Friday morning, the Shanghai market opened at 52.7 yuan ($8) per ton of carbon.
CITIC Securities stated in a recent research report that China’s average carbon price this year is expected to only hover around US$4.60, which is much lower than the EU’s average price of US$49.40 per ton.
According to the analysis company TransitionZero, issuing free pollution permits and symbolic fines for offenders will keep prices low.
However, China believes that Friday’s launch is only the first step.
The chief designer of the plan, Zhang Xiliang, said last week that the plan will be expanded to cover cement producers and aluminum manufacturers starting next year.
“Our goal is to expand the market to cover up to 10,000 emitters and emit about 5 billion tons of carbon annually,” Zhang said.
The Chinese official media also pointed out that the current version is already the world’s largest market in terms of covered greenhouse gas emissions rather than transaction value.
Other concerns about the plan include a lack of technical knowledge and continued pressure from powerful coal and steel lobby groups that may slow progress.
Huw Slater of the China Carbon Forum said that local officials and companies know little about emissions accounting and even the basics of climate science.
Regions that rely on the growth of coal and carbon-intensive industries have been slow to join the program.
“Officials worry that if they curb pollution too quickly, they may lay off workers and cause social unrest,” Slater said.
