China to launch landmark cap-and-trade program

By James Noble

October 1, 2015

China, the world’s largest emitter of carbon pollution, recently announced it will launch the largest cap-and-trade program in the world as a way to combat the country’s greenhouse-gas emissions.

The news came as President Xi Jinping visited Washington, D.C. last week to meet with his U.S. counterpart, President Barack Obama, as both countries prepare to strike a global emissions agreement at the Paris climate negotiations in December.

Chinese officials have been promising since last year to consolidate existing cap-and-trade schemes. China currently has a network of seven regional carbon markets, but there are wide variations in pricing among them.

The national emissions trading scheme will launch in 2017, creating a carbon market covering power generation, steel, and building materials including cement, chemicals, paper and non-ferrous metals.

What the market design will look like remains an open question, but it’s estimated that a nationwide scheme would regulate three to four billion tonnes of carbon dioxide a year.

China’s move is meant to align with the U.S. Clean Power Plan, which aims to reduce emissions in the American power sector to 32 per cent below 2005 levels by 2030.

A joint statement from the two presidents also confirms a Chinese “green dispatch” system that prioritizes low-carbon power sources in the electricity grid and a $3.1-billion fund to help developing nations tackle climate change.

In Canada, of the three candidates vying to become the next prime minister, only NDP Leader Thomas Mulcair has advocated for a cap-and-trade system. Under the NDP plan, provinces that already have carbon pricing would be allowed to opt out of the national plan.

Liberal Leader Justin Trudeau has also promised to put a price on carbon, but plans to leave more of the responsibility for meeting emissions targets with the provinces. 

Prime Minister Stephen Harper has established a target of reducing greenhouse-gas emissions to 30 percent below 2005 levels by 2030, though he remains silent on how to achieve those targets.



Photo Credit: Mingjia Zhou