Achievements and Prospect of China’s National Carbon Market Construction (2024)

Carbon trading internalizes the negative externalities of emissions and provides a solution for addressing the relationship between economic development and emission reduction through the principle of explicit carbon pricing. As of 2023, a total of 28 carbon trading systems have been put into operation worldwide, covering more than 17% of the total global greenhouse gases emissions. The implementation area has gradually expanded from developed countries to developing countries, and from Europe, North America, etc. to Latin America and East Asia. More regions choose to bind the emission reduction target of the carbon market with the macro emission reduction target of the region, and improve market efficiency through continuous optimization of the system. The influence of the carbon market has gradually increased. In 2023, major breakthroughs were made in China’s national carbon market, in terms of institutional methods including accounting, verification, quota allocation, data management, voluntary emission reduction, etc. The annual quota turnover was 212 million tons, which was 4.2 times that of 2022. The average carbon price was 68.15 yuan/ton, an increase of 23.24% compared with 2022 and an increase of 59.04% compared with the first performance cycle. After two performance cycles, China’s national carbon market has formed a complete process institutional framework with complete elements, clear division of responsibility, safe operation of supporting platforms, greatly improved quality of carbon emission data, preliminary formation of carbon price discovery mechanism, and initial effect of carbon emission reduction incentives and constraints. It has become an important policy tool for China to achieve the strategic goal of carbon peaking and neutrality. It is expected that China’s national carbon market will expand its industry coverage in the future, including cement, civil aviation, electrolytic aluminum, steel and other industries; optimize quota allocation methods and introduce paid allocation mechanisms; adjust performance mechanisms and clarify provisions for surplus quota carry-over; issue multiple CCER methodologies to improve the connection between mandatory emission reduction and voluntary emission reduction markets; accelerate the connection with international carbon markets and promote mutual recognition and exchange of technology, methods, standards and data; support active response to the EU’s carbon border adjustment mechanism.