China's National Emissions Trading Scheme

Definition

China's National Emissions Trading Scheme (ETS) is a market-based approach designed to reduce greenhouse gas emissions by allowing companies to buy and sell carbon allowances. It was launched in 2021, covering the power sector initially, with plans for broader coverage in the future. This scheme aims to create economic incentives for reducing emissions, thus contributing to China's climate goals and the global fight against climate change.

5 Must Know Facts For Your Next Test

1. China's National ETS is the largest carbon market in the world by volume, covering over 2,200 power companies and representing about 40% of the country's total carbon emissions.
2. The scheme operates under a cap-and-trade model, meaning that a limit is set on overall emissions, and companies can trade allowances to comply with this cap.
3. The initial phase focuses solely on the power sector, but there are plans to expand to other industries like steel and cement in future phases.
4. The trading scheme is part of China's broader commitment to peak carbon emissions before 2030 and achieve carbon neutrality by 2060.
5. China's ETS is seen as a crucial step in aligning national policies with international climate agreements, enhancing its role as a global leader in combating climate change.

Review Questions

• How does China's National Emissions Trading Scheme aim to reduce greenhouse gas emissions and what sectors are currently involved?
  • China's National Emissions Trading Scheme aims to reduce greenhouse gas emissions by using a market-based approach where companies can buy and sell carbon allowances. Initially, it covers the power sector, which significantly contributes to national emissions. By implementing this scheme, China incentivizes companies to lower their emissions while promoting innovation in cleaner technologies.
• Discuss the implications of China's National Emissions Trading Scheme on its international climate commitments and global efforts against climate change.
  • The implementation of China's National Emissions Trading Scheme has significant implications for its international climate commitments. By establishing the world's largest carbon market, China demonstrates its dedication to achieving its goal of peaking carbon emissions before 2030 and attaining carbon neutrality by 2060. This initiative not only helps align China's policies with global efforts against climate change but also enhances its position as a leader in environmental responsibility on the world stage.
• Evaluate the potential challenges and opportunities associated with expanding China's National Emissions Trading Scheme beyond the power sector.
  • Expanding China's National Emissions Trading Scheme beyond the power sector presents both challenges and opportunities. On one hand, integrating sectors like steel and cement may require significant adjustments in regulation and compliance mechanisms, as these industries have different emission profiles and economic impacts. On the other hand, such expansion could lead to greater reductions in overall emissions and stimulate advancements in green technology across multiple industries. Successfully navigating these challenges could solidify China's role in leading global climate initiatives while also fostering sustainable economic growth.

Related terms

Carbon Allowance: A permit that allows a company to emit a certain amount of carbon dioxide or equivalent gases, which can be traded with other companies.

Cap-and-Trade System: An environmental policy tool that controls pollution by providing economic incentives for reducing emissions, where a limit is set on total emissions and companies can trade allowances.

Greenhouse Gases: Gases that trap heat in the atmosphere, including carbon dioxide, methane, and nitrous oxide, which contribute to global warming and climate change.