China’s voluntary carbon market resumed trading this week after being suspended since 2017, which could help fund projects that reduce carbon emissions but would struggle to break even without additional funding.
While the initial resumption of trading was only for carbon credits approved before 2017, the Chinese government has said new approvals would include reforestation, mangrove cultivation, solar power, and offshore wind.
The revamped scheme will permit any business to buy carbon credits to offset their emissions, and individuals may also be allowed to sell carbon credits from green behavior in the future, according to the state-owned CCTV.
While the program may fall short of making a major dent in the country’s emissions, it will incorporate a greater portion of Chinese enterprises into the country’s growing carbon markets.
China may have hit its carbon peak already
The move to ramp up carbon trading comes as China is at or around its peak emissions. The Center for Research on Energy and Clean Air, a Finnish think tank, has said that China’s emissions may have peaked last year, but other assessments suggest that China’s carbon ceiling is still a year away. A slowing economy and a weakened construction sector coupled with the rapid construction of wind and solar power facilities has meant that regardless of the specific year the country will almost certainly have reached its emission peak before its goal of 2030, Li Shuo of the Asia Society Policy Institute wrote in TIME Magazine. Even so, the country has no plans in place to significantly cut its emissions from peak carbon this decade, the Climate Action Tracker noted. China has set a goal of reaching carbon neutrality by 2060. While some climate analysts have argued that China should move its targets back to reflect its progress, the country’s bureaucracy tends to be cautious about the risk of over-promising and under-delivering, Li argued.
EU carbon pricing will likely impact Chinese exports
Despite China’s efforts to ramp up its carbon trading, one of the most significant carbon initiatives that will affect Chinese industries is located thousands of miles away. The European Carbon Border Adjustment Mechanism is a regulatory tool that will be fully implemented by 2026, and will impose a carbon levy on imported goods imported from outside the EU that are not under domestic carbon taxes — such as Chinese aluminum, iron, and steel exports. While Chinese officials have complained that the mechanism stinks of protectionism and may violate fair trade principles, European officials hope that the rules will encourage China, as well as other countries, to develop more ambitious carbon pricing at home. The U.S., U.K, and Japan may all follow the EU’s example shortly, which could spell a “devastating collective blow” to Chinese industry, the Financial Times reported.