4. Giving Full Play to the Role of the Market

The carbon market provides an effective approach to managing the relationship between economic development and carbon emissions reduction. The national carbon emissions trading market (national carbon market) is a major institutional innovation that uses market mechanisms to control and reduce greenhouse gas emissions and promote green and low-carbon development. It is also an important policy tool for China to reach peak carbon emissions by 2030 and achieve carbon neutrality by 2060.

Carrying out pilot programs on carbon emissions trading. The carbon market institutions motivate companies to commit to curbing their emissions and use market-based instruments to price carbon reasonably, thus better allocating carbon emission resources. Starting from October 2011, seven provinces and municipalities – Beijing, Chongqing, Guangdong, Hubei, Shanghai, Shenzhen, and Tianjin – were selected to pilot projects for carbon emissions trading. Since 2013, seven local-level pilot carbon markets have been launched, covering nearly 3,000 key emissions companies in more than 20 industries, including power, steel, and cement. As of September 30, 2021, the total trading volume of the seven pilot carbon markets had reached 495 million tonnes of carbon dioxide equivalent, representing a value of approximately RMB12 billion. Major emitters in the pilot carbon markets have maintained a relatively high level of compliance rate, with both volume and intensity of carbon emissions within the market coverage maintaining a downward trend. This has given a significant boost to enterprises' contribution to emissions reduction, and raised the awareness of low-carbon development in all sectors of society. The local-level pilot projects have accumulated valuable experience for the launch of the national carbon market in terms of providing institutional references and training personnel.

Building a national carbon market system. Systems are key in advancing carbon market development. To better regulate the carbon market, the Chinese government promulgated the National Carbon Emissions Trading Market Construction Plan (Power Generation Industry), Measures for the Administration of Carbon Emissions Trading (for Trial Implementation), and a quota allocation plan for the national carbon market in the first compliance period. In 2021, with the release of guidelines for accounting and reporting corporate greenhouse gas emissions and three sets of management rules for carbon emission rights regarding registration, trading, and settlement, a basic national carbon market system was established. The legislative process has moved forward on the Interim Rules on the Administration of Carbon Emissions Trading, which consolidated the legal basis for carbon emissions trading, and ensured standardized operation and management in the key links of the national carbon market.

Launching the national carbon market. On July 16, 2021, the national carbon market started online trading. A total of 2,162 power generation companies were involved, representing 4.5 billion tonnes of carbon dioxide emissions, making this the world's largest emissions trading system. The launch attracted great attention and positive comments in China and elsewhere. As of September 30, 2021, the total trading volume in the market had reached 17.65 million tonnes, with turnover of RMB801 million. In general, the operation of the market has been stable and orderly.

Establishing a greenhouse gas voluntary emission reduction program. The China Greenhouse Gas Voluntary Emission Reduction Program was established in 2012. Its goals are to encourage the whole of society to participate in emissions reduction activities, ensure that the transaction entities fulfill their social responsibilities, pursue a low-carbon development path, and promote a low-carbon industrial structure and low-carbon energy consumption. As of September 30, 2021, the total trading volume of greenhouse gas voluntary emission reduction had exceeded 334 million tonnes of carbon dioxide equivalent, with turnover approaching RMB3 billion. China Certified Emission Reduction (CCER) has been introduced to pilot markets in offsetting carbon emissions, or writing off emissions occurred for public welfare purposes, effectively optimizing China's national energy mix and its compensation mechanism for eco-environmental conservation.