China’s carbon trading exchange struggles with unclear policies as it eyes expansion, say analysts

China’s new carbon trading market is riddled with policy ambiguities, say analysts, as it prepares to allow more sectors to participate in the new year.

Following its launch in July, the national emissions trading scheme (ETS) faces its first compliance deadline on December 31, when 2,162 power firms will have to hold carbon allowances that are at least equal to their actual emissions in 2019 and 2020.

The ETS, which currently only allows companies in the power sector to trade the allowances, will expand to allow financial institutions to participate. It will then gradually add more sectors until it covers all eight of China’s major emission-intensive industries by 2025, said Lai Xiaoming, chairman of the Shanghai Environmental and Energy Exchange (SEEE) that oversees the scheme.