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China Is Creating the World’s Biggest Carbon Market

December 19, 2017

The globe’s largest polluter has a radical plan to clean up its act. Following speculation throughout the year, the New York Times now confirms that China’s government has announced a carbon market that will offer companies incentive to reduce emissions.

Here’s what you need to know:

  • —The new market puts a limit on how much carbon power plants can emit. Those that go over can buy credits to cover their emissions; those that clean up can sell off parts of their own quota.
  • —It will initially cover power generators that release over 26,000 tons of carbon a year. That’s a good place to start: they contributed nearly half of the country’s emissions from fossil fuels in 2016.
  • —That alone is a huge deal. The Times says that it accounts for 3.3 billion tons of CO2 per year. (For context, the EU’s carbon market covers two billion tons.)
  • —A lot is still up in the air. Exact timing and regulations are still to be decided, and there’s no word on when the new regulation could extend to other heavily polluting sectors, like transportation and construction.

Reactions are mixed:

  • —Al Gore tells the Times that this “is yet another powerful sign that a global sustainability revolution is underway.”
  • —Derek Scissors, a China-focused economist at the think tank American Enterprise Institute, says, “I don’t take the carbon market seriously.”

If it works, it could be a big deal. But that’s a big if:

  • —China is the world’s biggest emitter. It burns over half of the world’s coal per year.
  • —The news further cements China’s newfound role as de facto global climate leader, and it could both put a dent in its emissions and inspire other countries to make similar moves.
  • —But many other carbon markets have flopped in the past, and it’s unclear how well the new rules will be adopted in China.
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