China's National Carbon Market One Year On - A Model for Developing Countries?


Energy Observer , Katowice, Poland

Michal Kurtyka, the President of COP24, at last put on a smile when the final agreement was adopted at the COP24 UN climate change conference. After 15 days of negotiations, the "rulebook" of the Paris Agreement was finally adopted by all parties. 

Kurtyka, who is also the State Secretary of Poland's Ministry of Energy, said China played a fundamental role in the climate negotiations. In the latter part of the negotiations, China relingushed its past position of pushing for a clear division of responsibilities for rich and poor countries and agreed to follow "uniform" climate change rules.

While progress was made on key areas for the implementation of the Paris Agreement, especially the requirement for greater transparency in emission disclosures, there was still a lack of consensus over other trickier issues.

The main sticking point was Article 6, the so-called “market mechanisms” which allow countries to meet a part of their domestic mitigation goals. Brazil, which has a large forest area, wanted to keep the carbon credits it amassed under an old system and tried to introduce new language to the text which developed countries argued lack transparency and would allow for “double counting” of emissions cuts. Since no agreement was reached, this issue was shelved until the next climate talks in Chile.

During the climate change conference, the Chinese delegation held a total of 25 side events at the China Pavilion, including one on China's national carbon market. Xie Zhenhua, China’s Climate Change Special Representative, delivered an opening speech at the national carbon market event, which saw a huge turnout by representatives of international and Chinese organizations. The crowd filled the aisles and entrances to the Pavilion, indicating the widespread interest in China's national carbon market development.

It has been nearly a year since China launched its national carbon trading market. Having spent seven years prior to the launch preparing and piloting the system (in seven provinces initially and one more pilot was added later on), how does China's carbon market compare to the development of carbon markets globally? What progress has been made after one year of implementation at the national level? Where are the priorities of the next phase? The Energy Observer sought answers to these questions from several carbon trading and energy experts on the side of COP24.

The world's largest carbon trading market

According to Fatih Birol, the Executive Director of the International Energy Agency (IEA), China's carbon market is the largest in the world, both in terms of its trading volume and scale, and its development and results can serve as a model for other develping countries.

Li Gao, Director of the Department of Climate Change in China's Ministry of Ecology and Environment (MEE) who was also the Deputy Head of the China delegation, explained that in the first year, the development of China's national carbon market mainly covered five areas, namely the establishment of the trading mechanism, basic infrastructure building, verification of emission data, capacity building and introducing carbon trading to the power sector. Currently the Department is focussing on the verification of emissions data from 2016 and 2017, and has established a national emission database. 

China's National Carbon Market One Year On - A Model for Developing Countries?

Li Gao, Director of the Department of Climate Change in China's Ministry of Ecology and Environment, spoke at the China Pavilion at COP24 on the prorities of China's national carbon market. (Photo by Yixuan Cai)

Emission reduction is main priority

In terms of the allocation of emission quotas, although China has not formally announced the national plan, according to insider sources, the state has already determined a set of allocation principles. At the same time, China is piloting the use of baseline emission data to allocate emission quotas, which is considered to be a more equitable approach compared to other methods of allocation. The national carbon market will therefore also adopt the same approach.

Although carbon traders are most concerned about carbon price, Zhang Xiliang, Director of Institute of Energy, Environment and Economy at Tsinghua University, who also participated in the design of China’s natonal carbon market, said that setting targets for emission reduction is China's top priority in its Emission Trading Scheme (ETS). Carbon price, on the other hand, would be determined by market forces.

Zhang said, "In fact the price of carbon is linked to the choice of the emission baseline. If we set a strict baseline and allocate tight emission quotas accordingly, we would be able to achieve the goal of emission reduction, and at the same time generate a reasonable carbon price."

He further pointed out that based on the analysis by Tsinghua University, with the combined effects of China's renewable energy policy, natural gas subsidy policy and carbon market on emission reduction, the carbon price may not necessarily be as high as expected.

Nevertheless, drawing from the EU (European Union) ETS and its carbon price trends, China's carbon price will likely continue to rise and Beijing's current carbon price (40-50 RMB per ton) could be used as a floor price in the future.

Comparing with California's carbon market design

Nathaniel Keohane, Senior Vice President of the Environmental Defense Fund agreed with Zhang that emission reduction should be the main priority of carbon markets. He  drew comparison between China and California's carbon markets. 

He said, unlike China's baseline emission approach, California adopted an output-based allocation (OBA) approach, for the reason that for power-intensive industries and other industries that are highly vulnerable to trade shocks, their energy costs account for a large share of the overall production costs, and free emission quotas using OBA would help them mitigate the risks and impacts of trade shocks. This approach provides emission credits based on economic outputs rather than emission levels, so in other words, it provides a subsidy for these industries.

Another strength of the California model, according to Keohane, is that it combines OBA with a consignment auction approach, which allows the market to work out the price and value of carbon. Under a normal auction, electricity suppliers would tend to pass on emission costs to the consumers by raising the price of electricity. On the other hand, free emission quotas may not effectively communicate price signals to consumers. The consignment auction, therefore, strikes a good balance between the two. It generated a large number of auctions in the early stages of California’s carbon market and protected consumers' interests while effectively reduced emissions. California model, Keohane said, could serve as a good template for China's carbon market design. At the same time, he stressed the importance of reassessing the carbon trading design regularly to ensure that it is working effectively to reduce emissions.

Importance of information gathering and communication

Liu Shuang, Director of the Low Carbon Project at the Energy Foundation, emphasized the importance of capturing data and information from the carbon market and establishing an open channel that facilitates information exchange among the stakeholders. The effectiveness of the design and operations of the carbon market should be assessed based on the information and feedback, and changes should be made accordingly. By sharing information, carbon traders would also receive medium and long-term price signals and be motivated to adopt emission reduction technologies and approaches.

Yixuan Cai reported from COP24 in Katowice, Poland, with the support of the 2018 Climate Change Media Partnership, a collaboration between Internews' Earth Journalism Network and the Stanley Foundation.

Below is the full report in Chinese. 


COP24速递 | 中国碳市场周岁,碳价预期如何?

eo记者 蔡译萱 发自波兰卡托维兹

波兰当地时间12月15日深夜,COP24大会主席波兰能源部副部长Michał Kurtyka终于微笑着敲锤宣布,各国代表达成协议,大会正式闭幕。



这一次没谈妥的细节包括 《巴黎协定》第六条规则的碳市场谈判(carbon market negotiation),即如何利用碳市场限制二氧化碳排放,为全球制定统一的碳市场规则。争议主要围绕在碳市场交易的机制。拥有大片热带雨林的巴西希望沿用在旧制度下累积的碳排放额度,但已开发国家代表却不赞成。他们认为旧制度缺乏透明度,这个做法疑会重复计算碳排放额。谈判各方为此未能达成协议,最终决定把碳排放交易细则推至明年即将在智利举行的COP25讨论。


距离全国碳排放权交易市场启动已接近一年。历经近七年的筹备时间和"7+1"地试点,中国碳市场在全球碳市场中处于怎样的发展阶段和水平? 启动一年后,碳市场的进展究竟如何?下一阶段发展重点又在何处? 国际机构专业人士有哪些建言?在联合国气候大会的第二周,多方业内人士向记者展开分析。




国际能源署署长比罗尔指出,在去年他同解振华的会面中, 除交流经验外,双方还签署了构建全国碳市场的谅解备忘录。中国碳市场就体量和交易规模而言,是世界上最大的碳市场,其建设成果可以成为其他发展中国家的模板。







当配额分配主要依靠行业的基准线,也就是说,配额适当从紧,基准线也要相应收紧。据清华大学能源环境经济研究所所长张希良介绍,适度从紧的概念意味着最起码现有的行业碳排放与基准情境下碳排放的情况(BAU,Business As Usual)相比要有绝对的下降,基准线也相应比较严 。







不过对于很多碳市场从业者而言,更关心的可能是碳价。张希良分析说,中国ETS(Emission Trading Scheme)首先是设定减排的目标,更关注减排,碳价则由市场决定。“如果我们将来设定基准线比较严,按照适度从紧的分配,就能实现减排的目的,也能有一个合理的碳价,碳价实际上和基准线的选择也有关系”,他表示。

他进一步指出,按照清华曾做的模型分析,如果考虑到可再生能源政策、天然气补贴政策以及碳市场,那么目前北京的碳价(40-50元/吨)将可能作为未来碳价的底价(floor price)参考。 但是,对中国来说最重要的还是确保减排,加之中国不仅有碳价政策,还有可再生能源和其他清洁能源补贴等政策,因此碳市场最终不一定会有很高的价格。不过,参考欧盟的机制及走势,预计中国将来碳价的走势依旧会不断上升。



对于中国启动一年的碳市场,美国环境保卫基金(Environmental Defense Fund)高级副主席Nathaniel Keohane对比了美国加州碳市场的经验。他认为碳市场的重点应该放在减排,而使其保持活跃并繁荣发展则要在分配方式上努力。加州采用了基于产出的分配法(Output based allocation approach),这是由于能源密集型和易受到贸易冲击的行业中能源成本在整体生产成本中占比重很大,为缓解贸易冲击担忧而首选的免费分配方法就是基于产出的免费分配(OBA)。它根据经济产出而不是排放水平来提供碳配额。实际上是为企业提供了一种补贴,基于产出的免费分配是在基于历史排放水平免费分配方法的一大改进。免费分配会导致一些价格扭曲,但由于企业还有出售剩余配额的动机,不会从根本上削弱配额价格。

同时加州碳市场还有一个优点,就是在OBA之外还配合委托拍卖配额(consignment auction)的方式,在市场进行价值和价格发现。相比单纯的配额拍卖,电力供应商会以更高的价格向电力消费者转嫁成本,而免费配额则未必能很好地向消费者传递价格信号;委托拍卖很好地平衡了单纯拍卖和免费分配的解决方案,它在碳市场运行的初期产生大量的拍卖,并且在有效保护消费者利益的同时减少了更多的排放量,这对于中国碳市场设计是一个好的模板。





本报道得到“2018年气候变化媒体伙伴”项目的支持。此项目由Internews 地球新闻网络(Earth Journalism Network)与Stanley基金会联合主办。