Skip to main content

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

  • Correspondence
  • Published:

Flexibility is needed in China’s national carbon market

Nature Climate Change volume 12, pages 106–107 (2022)Cite this article

Subjects

To the Editor — China launched its national carbon market on 16 July 2021. The market size with respect to CO2 equivalent emissions, generated from 2,162 power corporations covered in the first batch of trading, is estimated to exceed 4 billion tons per year. It has surpassed the European Union Emissions Trading System (EU ETS) to become the biggest carbon trading market in the world1. Unlike EU ETS, which caps absolute emissions, China’s carbon market adopts an intensity-based cap that limits carbon emissions per unit of output. Therefore, the initial allocation of allowances is based on a plant’s output and its sector-specific benchmark2. Although the current market design will not cap the output directly, more flexibility is needed to accommodate the huge regional disparities in China for the steady running of a giant but united carbon market. Furthermore, as compared with project-based mechanisms, the current allowance-based trading mechanism lacks the flexibility to incentivize the development of renewable energy.

While large amounts of energy and high-carbon-emission products are sent eastward, the emissions accounting, which is based on production, is conducted in the west. Furthermore, the relatively low level of economic development in these areas leads to inadequate funding and technological support for energy system transformation. This creates a double burden for western China, as these areas bear the cost of mitigation but lack the necessary access to update the energy system, and this will continue if regional disparities are not taken into account in the allocation of carbon emission allowances. On the other hand, in eastern China, the cost of additional local carbon reductions continues to rise, and the energy demand in western China is continuously growing.

This is a preview of subscription content, access via your institution

Relevant articles

Open Access articles citing this article.

Access options

Buy this article

  • Purchase on Springer Link
  • Instant access to full article PDF
Buy now

Prices may be subject to local taxes which are calculated during checkout

Fig. 1: The Chinese west–east power transmission project.

References

  1. Hou, L. Q., He, W., He, W. & Liu, K. China launches world’s largest carbon market. China Daily (17 July 2021); https://go.nature.com/3fitKoT

  2. China’s national carbon market to start trading in July. Xinhua (14 July 2021); https://go.nature.com/3G8eExW

  3. National Bureau of Statistics of China. China Energy Statistical Yearbook 2020 (China Statistics Press, 2021).

  4. Sun, J. W. & Jiang, Z. J. Party Sch. Central Comm. CPC 25, 77–87 (2021).

    Google Scholar 

  5. Liu, P. J. Report on electric power in 2021 spring. China Electric Power News (26 February 2021); https://go.nature.com/3G3ZZnB

  6. Pei, W. Y. Summary of the high-quality development of the West-East Gas Pipeline Company in 2020. Petroleum Business News (18 January 2021); https://go.nature.com/3t0bpoK

  7. Kyoto Protocol (UNFCCC, 1997); https://go.nature.com/336P1iy

  8. Paris Agreement (UNFCCC, 2016); https://go.nature.com/3zwCWzm

Download references

Acknowledgements

This study is supported by the Major Project of the National Social Science Foundation of China (grant no. 21&ZD133). We thank W. J. He and D. M. Yang at the Chinese Academy of Surveying and Mapping for the drawing in Fig. 1.

Author information

Authors and Affiliations

  1. State Key Laboratory of Pollution Control and Resource Reuse, Key Laboratory of Yangtze River Water Environment of Ministry of Education, UNEP-Tongji Institute of Environment for Sustainable Development, College of Environmental Science and Engineering, Tongji University, Shanghai, China

    Zhenliang Liao

  2. College of Civil Engineering and Architecture, Xinjiang University, Urumqi, China

    Zhenliang Liao

  3. School of Electrical Engineering, Xinjiang University, Urumqi, China

    Qiang Yao

  4. Department of Energy and Power Engineering, Tsinghua University, Beijing, China

    Qiang Yao

Authors
  1. Zhenliang Liao
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Qiang Yao
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding authors

Correspondence to Zhenliang Liao or Qiang Yao.

Ethics declarations

Competing interests

The authors declare no competing interests.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Liao, Z., Yao, Q. Flexibility is needed in China’s national carbon market. Nat. Clim. Chang. 12, 106–107 (2022). https://doi.org/10.1038/s41558-021-01273-6

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1038/s41558-021-01273-6

This article is cited by

Search

Advanced search

Quick links

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing