Emissions Trading in China: An opportunity for renewable energy?

This report summarizes expert interviews on the potential for China to earmark revenues from its national emissions trading scheme (ETS), planned for 2016, to support renewable energy. While experts find earmarking feasible, they suggest targeting less mature technologies (e.g., tidal, geothermal) and carbon capture rather than established wind and solar. Key challenges identified include the need for transparent governance, the harmonization of MRV rules across regions, and the avoidance of direct government price manipulation to ensure market efficiency.

• China is developing a national emissions trading scheme (ETS) with a stated goal of establishment in 2016, building on seven existing pilots in Beijing, Tianjin, Shanghai, Chongqing, Guangdong Province, Hubei Province, and Shenzhen. Experts identify the primary drivers as the government's commitment to reduce emissions, a willingness to use market-based instruments, and existing human capacity from the Clean Development Mechanism (CDM).
• While auctioning emission allowances is viewed as the primary method for raising revenue, experts believe that revenues will be relatively small in the short term because pilots are currently focused on finding "best practice" rather than revenue generation and auctioning is not yet widespread.
• There is a perceived funding gap for renewable energy subsidies; CNREC modeled costs of US$10 billion to $12 billion per year for 2013–2015, with a projected shortfall of approximately US$26 billion over the 12th Five-Year Plan period compared to the electricity surcharge revenue.
• Experts generally agree that earmarking ETS revenue for renewables is feasible, but they suggest focusing funds on less mature, higher-risk technologies like tidal and geothermal energy or low-carbon projects like carbon capture and storage (CCS), rather than established technologies like onshore wind and solar PV, which are already well-financed.
• Governance of an earmarking scheme presents challenges regarding institutional structure and regional coordination. Options include creating a new specialized agency, using existing entities like the CDM fund, or a cross-departmental collaborative group. Key concerns include the need for transparency, accountability, and the harmonization of monitoring, reporting, and verification (MRV) rules across different provinces.
• Market participants and experts emphasize that the government should avoid direct price manipulation of the ETS to prevent market distortion, instead using protective measures such as setting environmental goals or absolute emission caps.

APA

Wang, H. (2015). Emissions Trading in China: An opportunity for renewable energy? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/emissions-trading-in-china-renewable-energy.pdf

Chicago

Wang, Hanjie. Emissions Trading in China: An opportunity for renewable energy? International Institute for Sustainable Development, 2015. https://www.iisd.org/system/files/publications/emissions-trading-in-china-renewable-energy.pdf.

Wikipedia

{{cite report |last1=Wang |first1=Hanjie |title=Emissions Trading in China: An opportunity for renewable energy? |publisher=International Institute for Sustainable Development |date=April 2015 |url=https://www.iisd.org/system/files/publications/emissions-trading-in-china-renewable-energy.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wang2015emissions, author = {Wang, Hanjie}, title = {{Emissions Trading in China: An opportunity for renewable energy?}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = apr, url = {https://www.iisd.org/system/files/publications/emissions-trading-in-china-renewable-energy.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }