Chinese national carbon trading scheme

The Chinese national carbon trading scheme is an intensity-based trading system for carbon dioxide emissions by China, which started operating in 2021. The Chinese Ministry of Finance originally proposed a carbon tax in 2010, to come into effect in 2012 or 2013. The tax was never passed; in February 2021 the government instead set up an emission trading scheme (ETS) where emitters can buy and sell emission credits.

China is the largest emitter of greenhouse gases (GHG) and many major Chinese cities had severe air pollution through the 2010s, with the situation improving in the 2020s. The scheme is run by the Ministry of Ecology and Environment, which eventually plans to limit emissions from six of China's top carbon dioxide emitting industries. In 2021, it started with its power plants, and covers 40% of China's emissions, which is 15% of world emissions. China was able to gain experience in drafting and implementation of an ETS plan from the United Nations Framework Convention on Climate Change (UNFCCC), where China was part of the Clean Development Mechanism (CDM).

China's national ETS is the largest of its kind, and helps China achieve its Nationally Determined Contribution (NDC) to the Paris Agreement. In July 2021, permits were being handed out for free rather than auctioned, and the market price per tonne of CO₂e was around RMB 50, roughly half of the EU ETS and the UK ETS but better compared to the US, which has no formal cap-and-trade program. The system reduced emissions from the power sector by 13% during the years 2013-2020. By 2027, it is expected to expand to all major industrial emmiters and began to establish an absolute cap.