Carbon trading market continues growth

China's carbon trading market has witnessed significant growth since its launch in July 2021, with trading volume and value both increasing substantially, according to the Ministry of Ecology and Environment.

As of July 15, about 465 million metric tons of carbon emission allowances had been traded for nearly 27 billion yuan ($3.7 billion), the ministry said in a report made public at a conference in Wuhan, Hubei province, on Sunday.

Carbon trading is the process of buying and selling permits to emit greenhouse gases among designated emitters. Launched as the largest such scheme in the world, China's carbon trading market currently only involves the coal-fired power generation sector.

The program imposes carbon emission limits for every unit of electricity a power plant generates. Coal-fired power companies can sell any carbon allowances they have left after complying with their bench mark. If they fall short, they have to buy allowances.

An average of almost 3.7 million tons of carbon emission allowances changed hands every month in the first half this year, up almost 175 percent from the same period last year, the report said. The composite closing price in the market first exceeded 100 yuan per ton on April 24, compared with 50 to 82 yuan per ton during the second compliance period from 2021 to 2022.

The market has played a role in encouraging more action from enterprises to reduce emissions, the report showed.

Compared with 2018, the country's coal-fired power generation sector's carbon intensity — carbon emissions per unit of electricity generated — decreased by almost 2.4 percent last year, it said.

Addressing the Sunday conference, Ecology and Environment Minister Huang Runqiu pledged efforts to accelerate the development of the national carbon trading market, including incorporating key emitting industries like steel, cement and aluminum smelting more quickly.

Aside from enhancing the quality of carbon emission data, the ministry will diversify the trading entities, products and methods in the market, and also explore feasible pathways to incorporate carbon finance in the market.

Such developments aim to "leverage the carbon market's role in promoting low-cost greenhouse gas emission reduction and contributing to the ultimate goal of peaking carbon dioxide emissions and realizing carbon neutrality", Huang said.