China will launch a national emissions-trading program on Friday, according to people familiar with the matter, creating the world’s largest carbon market and doubling the share of global emissions covered under such programs.
The carbon market will help the country lower greenhouse-gas emissions and achieve its goal of reaching peak emissions before 2030 and carbon neutrality, or net zero emissions, by 2060, officials said at a news conference Wednesday. China is the world’s largest carbon emitter.
The program will initially involve 2,225 companies in the power sector. Those companies are responsible for a seventh of global carbon emissions from fossil-fuel combustion, according to calculations by the International Energy Agency.
Under the trading program, emitters such as power plants and factories are given a fixed amount of carbon they are allowed to release a year. They can in turn buy or sell those allowances. That pushes emitters to think of controlling and reducing emissions in terms of a market. Bloomberg earlier reported that the carbon market would start trading on Friday.
Over the next three to five years, the market is set to expand to seven additional high-emissions industries: petrochemicals, chemicals, building materials, iron and steel, nonferrous metals, paper, and domestic aviation.
Rather than be subject to the absolute caps on emissions in other trading programs and proposed by environmental officials, Chinese companies will start off with allowances that use benchmarks based on previous years’ performances, giving them more wiggle room. They can be traded by negotiation or auction, among other means.