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Ecology & Environment
Mahesh

15/09/24 19:43 PM IST

China’s carbon market

In News
  • China's carbon market consists of a mandatory emission trading system (ETS) and a voluntary greenhouse gas (GHG) emissions reduction trading market.
China's Carbon market
  • China’s carbon market consists of a mandatory emission trading system (ETS) and a voluntary greenhouse gas (GHG) emissions reduction trading market, also known as the China Certified Emission Reduction (CCER) scheme, revamped earlier this year.
  • The ETS will eventually include eight major emitting sectors including power generation, steel, building materials, non-ferrous metals, petrochemicals, chemicals, paper and civil aviation, which together account for 75% of China’s total emissions.
  • The two schemes operate independently but are interconnected via a mechanism that allows firms to buy CCERs on the voluntary market to meet their compliance targets under the ETS.
Emission trading system
  • China’s mandatory carbon market, the ETS, started trading in July 2021 on the Shanghai Environment and Energy Exchange.
  • During its first phase, it has included more than 2,000 key emitters in the power sector, each with emissions of at least 26,000 metric tons a year.
  • The same threshold will be used for the steel, cement and aluminium sectors.
  • Under the scheme, firms are granted a quota of free certified emission allowances (CEAs).
  • If actual emissions exceed a company’s quota during a given compliance period, it must buy more allowances from the market to cover the gap.
  • If its emissions are lower, it can sell its surplus CEAs.
  • Allocations are decided not by absolute emission levels, but by industry carbon intensity benchmarks set by the government, which are reduced over time.
  • Emitters are obliged to submit key parameters on a monthly basis and report emission data every year.
  • Since its inception, it has become the world’s largest emissions trading platform, covering about 5.1 billion tons of carbon dioxide equivalent, around 40% of China’s total.
  • By the end of 2023, the trading volume on the national ETS had reached a cumulative total of 442 million tons, with a value of 24.92 billion yuan ($3.50 billion), according to official data.
  • The inclusion of three more sectors is expected to bring another 1,500 key emitters and 3 billion tons of emissions under the scope of the ETS, raising demand for credits and potentially pushing up prices.
  • The carbon price on the national ETS, which tends to rise when quota allocations fall, has typically been much lower than overseas markets, but broke through 100 yuan a ton for the first time on April 24.
CCER
  • Beijing relaunched its national voluntary GHG emission reduction trading market, known as the CCER, in January, allowing wider participation in the carbon market.
  • The registration and issuance of CCERs was suspended in 2017 partly due to low trading volumes, although existing credits can still be traded.
  • The addition of more sectors to the mandatory carbon market is expected to lift demand for CCERs, with key emitters allowed to use the voluntary market credits to offset 5% of their total emissions.
Source- Indian Express

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