COP26: China must broaden scope of national carbon trading market to meet climate commitments, say experts

Name: COP26 Glasgow, the UN Climate Change Conference: last chance to save the planet?
Uploaded: 2021-10-29T06:38:31.000Z
Duration: 3 min 38 s
Description: COP26 Glasgow, the UN Climate Change Conference: last chance to save the planet?

Tightening quotas and including more sectors will help China’s carbon-trading exchange play a bigger role in decarbonisation drive, analysts say

Ahead of the COP26 summit, China released a framework for its path towards peak emissions and carbon neutrality

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People take part in a climate march in Brussels, Belgium, ahead of the COP26 climate summit in Glasgow, on October 10. Photo: Reuters

Yujie Xuein Shenzhen

Published: 2:38pm, 29 Oct 2021Updated: 5:09pm, 31 Oct 2021

China’s carbon trading market needs some fine-tuning to help the nation achieve carbon neutrality by 2060, industry experts said ahead of the COP26 summit where global leaders are expected to discuss policies to avert the disastrous consequences of climate change.

Adjustments such as tightening quotas allocated to power generators and widening trading scope to include more emissions sectors could greatly help the national carbon emission exchange play a bigger role in using market forces to guide decarbonisation in the most cost-effective way, analysts said.

“The current design of the national ETS [emissions trading scheme], especially the intensity-based target and lax benchmarks, is hampering its effectiveness,” said Yan Qin, lead carbon analyst at data provider Refinitiv. “This could be for the purpose of a soft start, but the current design has caused low liquidity and low prices in the ETS due to oversupply.”

China’s national ETS kicked off on July 16 and is overseen by the Shanghai Environment and Energy Exchange. The trading scheme currently only applies to power generators and includes about 2,200 electricity companies which together are responsible for over 4 billion tonnes a year of carbon dioxide emissions, roughly over 40 per cent of the country’s total emissions.

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COP26 Glasgow, the UN Climate Change Conference: last chance to save the planet?

“The ETS design needs to be transformed to a system with an absolute cap and also a tighter benchmark for the producers,” said Qin. Auctioning should also be gradually introduced so that producers face true carbon costs, incentivising them to switch to low-carbon generation, she said.

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