The Shanghai Environment and Energy Exchange Platform will host the national carbon trade. In the initial phase, the carbon trading scheme will cover only the electricity sector, allowing the participation of more than 2,200 large electricity companies.
As it was pointed out, China uses market tools to encourage decarbonisation, while that country is marching towards its goal of carbon neutrality by 2060.
The trade mechanism operates on the principle of “limit and trade”, enabling carbon emissions to be traded as a commodity.
China’s Ministry of Environment and Environment sets an upper limit on the total amount of carbon emissions for a given year, and then companies receive or buy emission quotas within this limit.
The company must provide sufficient permits to cover all of its emissions annually or will face a fine. It is envisaged that companies can trade with each other for carbon emissions permits on the trading platform.
The national carbon market was established in February this year after seven pilot schemes were announced across the country.
The ministry predicted carbon prices would be around 40 yuan ($ 6.19) per tonne, according to previous prices in the pilot schemes.