China is planning the world’s biggest carbon market, but with little detail given for its design, praise for the scheme is premature

China’s emissions trading scheme will target coal power plants, like this one in Tianjin. But the restrictions have not yet been made clear (Photo: Shubert Ciencia)

Much hype surrounds China’s national carbon market. Expected to begin later this year, the cap and trade system has been ballyhooed as an “ambitious” climate policy that will deliver a major portion of Beijing’s pledge to the Paris Agreement.

This narrative makes intuitive sense in the current political times. As the US federal government abdicates its responsibility to combat climate change, we are eager to fill the void in what we perceive as climate leadership. And for those following the arduous, halting history of carbon pricing, China’s plan offers hope that such policies can indeed make a big difference.

But China has released limited information about the market’s most essential design features. It is an open question whether its carbon market will rectify or repeat the failures of similar policies around the world.

The excitement often revolves around the plan’s unprecedented scale. China is building a carbon market that will at first likely include three of its major industries – aluminium, cement and coal power. Thus, it will cover yearly emissions of around 5 billion tons of CO2. This is more than twice the size of the European market, currently the world’s largest. Building a carbon market of this size in China, where emissions have gone unmeasured until now, is indeed remarkable.

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Yet, to applaud it for its sheer size and complexity is to lose sight of the fact that a carbon market is nothing more than a means to an end. Instead, we should measure it against what it is…