- The Chinese government is slowly ramping up its decarbonization agenda in 2023, after pausing many planned measures to ensure economic stability during the pandemic.
- Besides restarting its voluntary carbon trading mechanism and pushing the establishment of a product carbon footprint system, China is also developing a more dynamic (mandatory) carbon allowance trading market.
- Although the current national CEA market is limited to the power sector only, both trading volume and trading price of CEAs have grown significantly in 2023, underpinned by regulations that require power companies to fulfill carbon emission targets.
- The average CEA trading price has grown to 68 RMB/ton in 2023 marking a 23 percent increase compared to the average price in 2022 and a 58 percent increase compared to 2021. The trading volume of CEAs in 2023 reached 212 million tons, 4.2 times the trading volume in 2022.
- However, China’s domestic carbon price still significantly lags behind the carbon price in the EU, traded at 82.7 EUR/ton as of Dec 29, 2023. This will continue to cause problems for Chinese exporters when facing stricter carbon-based trading regulations in the EU, e.g., the Carbon Border Adjustment Mechanism (CBAM).
- These external pressures will further push China’s policymakers to pursue the domestic decarbonization agenda.
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.