Currently, emissions trading in China is restricted to the energy sector only, but the country is set to open up this carbon market to the cement, steel and aluminum industries. The Ministry of Ecology and Environment wants to add more high-emission industries to the carbon emissions trading system (ETS) by the end of 2024.
The ministry announced that with this initiative, greenhouse gases covered by the trade will grow to about 60 percent of China’s total emissions, this percentage will be greater than all U.S. emissions. This expansion of China’s ETS will include about 1,500 industrial companies.
China’s carbon trading system will be expanded by first familiarizing participants between 2024 and 2026 and improving the management and quality of the data retrieval process, while reducing quota allocations to companies from 2027. Carbon emission rights quotas will initially be allocated to companies for free, according to Reuters.
There is currently no cap on greenhouse gas emissions between 2024 and 2026. Therefore, there is little pressure on companies that join China’s ETS to reduce greenhouse gas emissions immediately. The goal is to expand the market and catch up with more mature carbon trading schemes, such as the European model. China’s ETS currently includes more than 2,000 companies producing 4.5 billion tons of CO2, compared to the EU ETS, which had a limit of 1.6 billion tons of CO2 in 2021.
China aims to reduce CO2 emissions by 3 million tons through equipment upgrades in the cement sector between 2024 and 2025, according to the National Development Plan and the Reform Commission. During this period, the country aims to reduce the equivalent of 5 million tons of coal used in cement production. In a plan released earlier this year, China stated that half of the clinker production capacity in its key air pollution control regions should complete the ultra-low-emission transformation by the end of 2025. Furthermore, by 2028, approximately 80 per cent of China’s total clinker production capacity will have completed the transition.
According to Shan Xinyi, an analyst at the Center for Energy and Clean Air Research, China’s emissions trading system has minimal impact on CO2 emissions so far, mainly due to factors such as the generous supply of allowances. However, the ministry is likely to strengthen incentives after 2026 by reducing the number of free allowances and boosting market activity. Jingwei Jia, an associate director at Sustainable Fitch in Hong Kong, mentioned that carbon intensity benchmarks will be gradually lowered, more companies and more sectors will enter this market, and the demand for carbon allowances and, consequently, the trading price will gradually increase.
Therefore, China’s carbon trading system will only be effective in addressing carbon emissions when the cap on emissions has been introduced and carbon emission prices begin to rise. By the end of 2023, the cumulative transaction volume of carbon emission rights in China’s carbon emissions trading system reached 4.433 billion tons, with a total transaction value of 24.92 billion yuan (3.49 billion US dollars), according to a report by the Ministry of Ecology and Environment. According to Resources for the Future, between 2026 and 2034, China is projected to reduce GHG emissions by 13.3 percent, compared with a reduction of only 3.6 percent between 2022 and 2026.
Leading China toward an effective ETS market that forces cement producers and other heavy industries to reduce their carbon emissions will be essential to meet the country’s goal of carbon neutrality by 2060.
At Seal Plus / Motofrenos, we support these initiatives that contribute to the reduction of CO2 emissions in the cement industry and other industries. With our rotary kiln seal solution, we work together with our clients, supporting them in reducing the consumption of kilocalories per kilogram of clinker, optimizing the operating conditions, and reducing material loss, which helps us contribute to the preservation of the environment.
Source: https://www.cemnet.com/
