China’s Carbon Emission Trading: an Experiment to Watch Closely

China is transitioning from top-down command-and-control energy policies to market-based instruments, aiming for a national carbon trading system by 2016. While the country has been a global leader in the Clean Development Mechanism (CDM), its domestic market remains in a research-and-development stage. Current efforts focus on seven regional pilots and potential sector-based schemes for power and buildings. Significant hurdles remain, including the lack of reliable baseline emission data, the absence of a mature free-market economy, and the need for a legal infrastructure to manage permit allocation and verification.

• China's domestic carbon market is currently in a research-and-development phase with no functional trading yet, although there is a consensus that such markets are inevitable.
• The Clean Development Mechanism (CDM) has been the primary source of carbon trading in China, with the country serving as the largest seller of offsets, including nearly US$1.3 billion in credits in 2009.
• The National Development and Reform Commission (NDRC) has launched regional carbon trading pilots in seven locations: Beijing, Shanghai, Tianjin, Chongqing, Shenzhen, and the provinces of Guangdong and Hubei.
• China is exploring sector-based carbon trading, specifically targeting the power sector due to its heavy coal reliance and the building sector, where 80% of existing buildings are considered non-energy efficient.
• The establishment of a functional system is hindered by a lack of reliable carbon emission data, insufficient third-party verification companies, and the absence of essential legislation.
• There is an ongoing policy debate regarding whether to implement an absolute emissions cap, which provides predictability, or an intensity-based cap, which would be less controversial as it does not conflict with GDP growth.
• The viability of a carbon market in China is questioned due to the lack of a mature free-market economy, characterized by heavy government intervention, state-owned enterprises, and non-liberalised price controls.

APA

Stockholm Environment Institute (2012). China’s Carbon Emission Trading: an Experiment to Watch Closely. https://www.sei.org/mediamanager/documents/Publications/china-cluster/SEI-PB-2012-China-carbon-markets.pdf

Chicago

Stockholm Environment Institute. China’s Carbon Emission Trading: an Experiment to Watch Closely. 2012. https://www.sei.org/mediamanager/documents/Publications/china-cluster/SEI-PB-2012-China-carbon-markets.pdf.

Wikipedia

{{cite report |author=Stockholm Environment Institute |title=China’s Carbon Emission Trading: an Experiment to Watch Closely |date=2012 |url=https://www.sei.org/mediamanager/documents/Publications/china-cluster/SEI-PB-2012-China-carbon-markets.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stockholmenvironmentinstitute2012chinas, author = {{Stockholm Environment Institute}}, title = {{China’s Carbon Emission Trading: an Experiment to Watch Closely}}, institution = {Stockholm Environment Institute}, year = {2012}, url = {https://www.sei.org/mediamanager/documents/Publications/china-cluster/SEI-PB-2012-China-carbon-markets.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }