As a major player in world trade and the world’s largest emitter of GHGs, the introduction of a national emissions trading scheme (ETS) in China will send an important policy signal about the country’s climate commitment and its support for carbon markets as an effective mitigation tool. This can send a powerful signal and spur the further uptake of carbon markets around the world.
Unilateral climate measures like carbon markets are often accompanied by competitiveness, free-riding and carbon-leakage concerns. A national ETS in China has the potential to reduce these concerns in other jurisdictions as it would help level the playing field on carbon pricing.
China’s national ETS could also send an important signal and incentivize other countries to implement carbon markets. This has the potential to enhance cooperation on carbon markets through increasing possibilities for ETS linkages, potentially in a plurilateral carbon market club. This can also reduce concerns about the mutual supportiveness and aggregate effect of individual contributions under the new bottom-up climate agreement by aligning national climate measures and driving more ambitious action.
In China, the focus first needs to be on putting a well-functioning and environmentally credible ETS into place. At a later stage, China could however join such linkage initiatives, thereby further scaling up the benefits of cooperation on carbon markets.
This session discussed the implications of the upcoming national Chinese ETS for the development of carbon markets, including linking of ETSs and the potential development of a plurilateral carbon market. The discussion took place in the context of the wider carbon market developments around the world and the multilateral climate negotiations. The event brought together a diverse group of speakers with different institutional and regional backgrounds.
The event took place on Monday, 7 December from 9:15-10:45 in the OECD Pavilion (Hall 3 No. 7).