China 'preparing to launch its first emissions trading scheme'
The Chinese government is drawing up the first emissions trading scheme in the nation's history, after it committed to carbon neutrality by 2060.
Back in September 2020, China’s President Xi Jinping announced that the country would aim to reach peak emissions before 2030 and carbon neutrality by 2060. Targets are expected to be enshrined in law in the near future.
In a step towards realising this vision, the Chinese Government is drawing up plans for an emissions trading system (ETS) and this week passed legislation allowing provincial governments to develop legally binding emissions caps for large power businesses.
Under the new rules, big and high-emitting businesses in the power sector can start trading emissions with each other from 1 February. Some 2,200 firms will be covered by the new system and. Each emits at least 26,000 tonnes of greenhouse gases annually.
China is starting with the power sector as it is the highest-emitting sector in the country, accounting for around one-third of national annual emissions. Around 60% of power generation in China is attributable to coal. Plans for other sectors have not yet been drawn up but, even with just power, the Chinese ETS is set to be the largest in the world, eclipsing that of the EU.
While green groups have broadly welcomed the move to implement an ETS, the devil will be in the detail. There are concerns that the coal lobby will press hard for caps that do not require the power sector to deliver deep decarbonisation.
Moreover, some groups wanted the ETS to extend to aviation (responsible for 3% of global emissions), steel (responsible for 7% of global annual emissions) and petrochemical manufacturing.
In June 2020, it was revealed that 53% of global GDP is covered by a net-zero ambition in some form. China accounts for 9% of global GDP so, when it made its commitment, the proportion surpassed 60% for the first time.
China’s move sparked a flurry of similar policy announcements elsewhere. October saw Japanese Prime Minister Yoshihide Suga vowing to enshrine a 2050 net-zero target in national law, as he made his first official policy address. South Korean President Moon Jae-In and Canadian Prime Minister Justin Trudeau then followed suit.
These decisions have heightened optimism for the outcome of COP26, taking place in Glasgow in November. The election of Joe Biden in November and this week’s confirmation of his presidency by the Senate also mean that the US will be back at the table, after the Trump administration withdrew the nation from the Paris Agreement.