China, the world's largest polluter, is set to launch its nationwide emissions-trading system on Friday, sources with knowledge of the plans told The Wall Street Journal on Wednesday.
China's entry into the carbon market would double the share of greenhouse gas emissions being traded under such schemes around the world, the Journal notes.
The step toward creating a national emissions-trading system is part of the Chinese pledge to reach net-zero emissions by 2060, a decade later than the deadline for most developed economies, 2050.
The national carbon emissions trading scheme (ETS) is expected to initially include emission trading among 2,225 firms in the power-generation sector, one of the large polluters in China. Companies will be given a specific allowance of carbon emissions that they will be allowed to emit every year. The companies will then buy or sell allowances, which is ultimately expected to incentivize them to reduce emissions.
It is not clear yet how much the allowances will trade for on the carbon emissions market, according to the Journal.
The Chinese carbon trade market will be the world's largest when it launches, the authorities say.
The country has already set up the trading platform of the national emissions trading system on the Shanghai Environment and Energy Exchange, Reuters reports.
China's carbon emissions market is set to expand 30 times over the next ten years, reaching $25 billion by 2030, Bloomberg reported earlier this year, citing an analysis by Citi.
"The Chinese national ETS [emissions trading system] as currently rolled out should play a limited role in reducing emissions at first," Citi analyst Tracy Liao said, as quoted by Bloomberg.
"We expect a series of developments to transform China's ETS into the world's largest effective carbon trading scheme and a key building block of the country's 2030 peak emissions commitment."
China aims to have its emissions peak by 2030 and to be carbon neutral by 2060.
Experts, however, are concerned that China continues to expand its coal production, while the fines for firms that exceed their quotas under the emissions trading scheme are too low to incentivize full compliance.
The fines are "too low to act as a deterrent," Zhang Jianyu, vice-president of the Environmental Defense Fund China, told AFP earlier this year.
By Tsvetana Paraskova for Oilprice.com
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