China Launches its First National Carbon Emission Trading Scheme

China launched its first national carbon emission trading scheme (the “ETS”) on 16 July 2021. On its first trading day, the national ETS concluded with a total trading volume topping 4.1 million tonnes of carbon emission allowances (the “CEAs”) and a total trading amount of around RMB 210 million. The national ETS is established with a view to eventually consolidate the existing nine local trading markets after approximately eight years of local trading activities, and is intended to be an essential tool for China to control its overall carbon emission and thereby fulfil its commitment to reach peak emissions by 2030 and carbon neutrality by 2060.

While the local trading markets have evolved to have some level of maturity with regard to the types of participants and trading products, the new-born national ETS remains at the early stage of its lifecycle. Future developments of the national ETS are to be watched, in particular the inclusion of foreign-invested participants or institutional investors as well as the introduction of diversified tradable products.