A year on, China’s CO2 market fails to drive big emission cuts

by | Jul 22, 2022 | World

Critics say emissions allowances are ineffective due to industry efficiency benchmarks being set at a relatively low bar.China’s year-old carbon market has given more than 2,000 power plants a taste of emissions trading, but design flaws and data fraud have meant limited large-scale greenhouse gas reductions and environmental gains, experts say.
China’s much-heralded Emissions Trading Scheme (ETS) is already the world’s biggest, regulating about 4.5 billion tonnes of annual CO2 output from the power industry. Nearly 200 million tonnes of carbon changed hands in the first year of operations at a total value of 8.5 billion yuan ($1.26bn).
However, trading has been relatively slow, dogged by a surplus of emissions allocations as well as concerns about data accuracy.
“In terms of the impact, in terms of environmental gains, clearly it’s been limited,” said Matt Gray, co-founder of TransitionZero, a climate think-tank.
Some of the criticism of the ETS is down to the scheme’s design. Emission allowances are handed out free of charge and are determined not by absolute emission volumes but by industry efficiency benchmarks set at a relatively low bar.
Though environmental gains have been limited so far, China’s cautious approach was designed to gain experience and iron out any potential problems without overburdening its enterprises.
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