Chinese climate policies with an emphasis on its carbon markets

Smog in Chongqing, China

China played a vital role in the successful entry-into-force of the Paris Agreement (PA) and has continued to show commitment to its implementation. The country has adopted a range of climate policies in order to fulfil its Nationally Determined Contribution commitments by accelerating efforts to both improve levels of energy efficiency and to encourage a shift away from coal energy to low-carbon alternatives. While the carbon and energy intensity targets for 2020 as outlined in the 13th Five Year Plan appear to be within reach, the recent increase in coal consumption in China has led to concerns regarding the achievement of the 2030 targets. Transforming such a vast economy and its energy system is in any case a long-term task that requires continuous political commitment and a wide range of well-functioning policies across different levels and sectors. One policy that China is employing to reach this target is the implementation of a National Emissions Trading Scheme (ETS).

The Environment, Public Health and Food Safety Committee (ENVI) of the European Parliament (EP) sent a delegation to China to work on European and Chinese climate policies. To prepare this delegation, the Directorate-General for Internal Policies of the Union of the EP commissioned adelphi and Öko-Institut to compile a policy briefing.

adelphi, in cooperation with Öko-Institut, researched China's climate policy, looking among others at its implementation of the Paris Agreement, Chinese pilot projects for emission trading, and opportunities for cooperation between the European and the Chinese emissions trading systems. On this basis, they co-authored a policy briefing aiming to tackle the challenges facing China on its quest to reducing its emissions and transforming its energy mix. The report provides sound policy advice on how China could best implement its carbon market and wider energy. The report details how, if the national Emissions Trading Scheme is implemented successfully, a strong CO2 price signal (along with market reforms to the power sector) should ensure that CO2 emissions in China peak by 2030. The briefing explains how this price signaling can be achieved through successful implementation of the National ETS, with lessons being garnered from regional ETS pilots currently in place.