HONG KONG—China is set to launch its long-planned national emissions-trading program—a system that would create the world’s largest carbon market and double the share of global emissions covered under such programs.
The carbon market will help the country lower greenhouse-gas emissions and achieve its goal of reaching peak emissions before 2030 and carbon neutrality, or net zero emissions, by 2060, officials said at a news conference Wednesday. China is the world’s largest carbon emitter.
Invitations for launch ceremonies set for Friday were sent out, according to people familiar with the situation.
The program will initially involve 2,225 companies in the power sector. Those companies are responsible for a seventh of global carbon emissions from fossil-fuel combustion, according to calculations by the International Energy Agency.
Under the trading program, emitters such as power plants and factories are given a fixed amount of carbon they are allowed to release a year. They can in turn buy or sell those allowances. That pushes emitters to think of controlling and reducing emissions in terms of a market.
Bloomberg earlier reported that the carbon market would start trading on Friday.
Over the next three to five years, the market is set to expand to seven additional high-emissions industries: petrochemicals, chemicals, building materials, iron and steel, nonferrous metals, paper, and domestic aviation.
Rather than be subject to the absolute caps on emissions in other trading programs and proposed by environmental officials, Chinese companies will start off with allowances that use benchmarks based on previous years’ performances, giving them more wiggle room. They can be traded by negotiation or auction, among other means.
China’s officials have signaled that they plan to add the cement, aluminum and steel sectors to the program next year. The program is expected to adopt stricter caps in the future, although the timing and scope hasn’t been determined, the people say.
It isn’t known how much an allowance, equivalent to 1 metric ton of carbon emissions, will trade for. Based on regional pilot projects in the previous two years, the average price on the national market is expected to be the equivalent of $6.18 to $7.73, Zhao Yingmin, China’s deputy environment minister, said Wednesday.
The starting price is much lower than the roughly $59 to $70 a metric ton in Europe’s emissions trading program and the $55 to $69 a ton in the U.K.’s system. It would put China’s carbon-emissions prices in line with those of a similar program in the U.S.
Emissions-trading experts expect a slow start for the program and for the first year to be focused on ensuring basic market functionality. “But once it’s all in place, it’ll be one of China’s best mechanisms to incentivize economically sustainable carbon reductions over the long term,” economics consulting firm Trivium China told clients in a note this week.
China’s Ministry of Ecology and Environment will act as the trading platform’s regulator and supervisor. Companies are expected to compile and submit their emissions data to the provincial branches of the ministry, which is charged with verifying the information and ensuring the system works as planned. Failure to comply could result in a maximum fine of $4,600 or a reduction in future allowances.
First floated in 2011, plans for a nationwide program were confirmed in a U.S.-China joint climate statement in the run-up to the Paris climate talks in 2015. The Covid-19 pandemic delayed plans for a soft launch in 2020.
With high-level officials busy before the Chinese Communist Party’s centennial on July 1, authorities had to postpone the targeted launch date in late June by a few weeks, people familiar with the matter said.
—Xiao Xiao in Beijing contributed to this article.
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