China needs to resolve its conflicting policies on reducing carbon emissions and on increasing economic growth if it is to implement a cap-and-trade system successfully (see Nature 526, 13–14; 2015).

For example, the government subsidizes several industries that are big energy consumers and generate excessive emissions and pollution. China's coal-driven iron and steel industry is one such case, despite its overcapacity, low profit and vicious competition.

By June 2015, six months after China's revised Environmental Protection Law came into effect, 2,556 listed companies were in receipt of government subsidies that totalled 250 times more than the fines for environmental damage (see (in Chinese) and D. Liu Nature 525, 321; 2015).

These absurd subsidies hamper the transformation of industry to cleaner production and distort resource allocation through local protectionism and lobbying. They should be backed by firmer legislation or abolished.