National carbon market expansion may be delayed to 2023

The expansion of China’s emissions trading scheme (ETS) beyond power generation will be delayed to 2023 at the earliest, according to a report in financial news outlet Caijing published on 12 May.

Previous expectations had been for at least two or three new sectors, including cement and aluminium, to join trading this year. But, citing “multiple trustworthy sources”, Caijing wrote that poor quality of reported data is delaying the expansion. Industry insiders warn that the slow progress is not helpful for decarbonisation and threatens to weaken the international competitiveness of Chinese companies.

In an interview with Caijing the previous week, Zhang Xin of the National Centre for Climate Change Strategy called accurate and reliable data “the lifeline” for effective operation of the carbon market. He noted that the Ministry of Ecology and Environment is taking a hard line on data falsification. But also emphasised that laws and regulations need to be strengthened to close loopholes.

“Although the falsification of data is not widespread, it has an influence on the effective operation of the national ETS,” he told Caijing. 

The WeChat account CarbonInvestment disputed Caijing’s claim that data quality is the main cause of the delay. It argues that challenging rule-making processes, such as setting sectoral benchmarks and allowance allocation mechanisms, are the bigger hurdle to expansion.   

China’s carbon market, the world’s largest, has experienced many delays since its announcement in 2017. At the beginning of last year, trading in the power sector officially commenced. Cement, aluminium and crude steel are expected to be the next industries brought into the ETS in 2023, with trading possibly not beginning until 2024. 

Read more on China’s evolving carbon market on China Dialogue here.