China to launch world’s largest financial market for carbon emissions

Business & Technology

Officials in Beijing announced on Tuesday a blueprint for opening the world’s largest financial market for carbon emissions, a long-anticipated move in China’s ongoing fight against pollution. It is expected to use a cap-and-trade system in which companies that want to pollute beyond their allocated quota will have to buy credits from firms that have reduced their emissions.

While it’s a significant step in the right direction, views on the short-term outlook are varied.

  • Bloomberg notes that the plan to cover 1,700 utility companies falls far short of the 6,000 companies considered for inclusion last year. Li Shuo, senior global policy adviser for Greenpeace East Asia, told Scientific American that “it is important to bear in mind that the first phase will be embryonic.”
  • However, the power sector does account for almost half of China’s fossil fuel emissions, reports the New York Times (paywall), and a nationwide market in China will help boost global efforts to curb greenhouse gases through markets, which have faltered.
  • China’s own experiences with local-level pilot programs have been mixed, with too many credits issued to polluters, giving them little incentive to reduce emissions. However, Quartz notes that even if emissions are not reduced right away, the pollution monitoring envisioned by the plan would be “a huge benefit in a country notorious for its lack of trusted data.”  
  • All the rules and regulations associated with the program have yet to be drafted, and no start date has been set — it could still be years away.