China carbon credit
Executive summary
China’s national carbon market is now the world’s largest by emissions covered and has seen renewed activity — including revival of voluntary CCER credits — with price estimates varying across analysts: Clear Blue projects CEA prices averaging 98–100 yuan in 2024–25 and rising to 200 yuan by 2030 [1] [2], while other observers put opening-day or early prices near 49–66 yuan/ton and NGOs/surveys forecast 50–93 yuan through the decade [3] [4] [5]. Analysts warn domestic prices (roughly USD11/t in 2025 by one estimate) remain far below EU levels (~USD80/t) and that oversupply, verification and enforcement risks could keep prices and emissions impacts limited unless policy tightens [6] [7] [8].
1. China’s market has scale — and uncertain price signals
China’s national ETS “doubled” global emissions covered and is now the largest carbon market, initially targeting the power sector with plans to expand to heavy industries and eventually cover more than 8 billion tonnes by 2030 [9] [2]. That scale creates potential leverage over global carbon flows, but reported price levels are uneven: initial trades and analyst surveys put prices around 49–71 yuan/ton early on, Clear Blue reports a higher average near 98 yuan for 2024 and models 100 yuan in 2025 rising to 200 yuan by 2030 — while IEEFA and other observers report Chinese credits trading at about USD11/t in 2025 versus EU ETS ~USD80/t [3] [2] [6].
2. Revival of voluntary credits (CCER) is driving volatility
Beijing reopened the voluntary CCER scheme after an eight-year hiatus, prioritising renewables and afforestation projects and approving new projects (offshore wind, solar thermal) expected to supply millions of credits in 2025; that revival has produced sharp price swings in CCERs and increased short-term supply [1] [10]. Market participants and price forecasters differ on how that supply will interact with compliance demand — Clear Blue and industry trackers expect rising allowance prices as coverage expands, while others caution that sudden CCER issuance can create oversupply and depress prices [2] [8].
3. Design choices limit how fast emissions fall
China’s ETS uses an intensity-based, rate-focused design rather than a strict mass cap — a multi-sector tradable performance standard that initially allocates allowances largely free and phases reforms over time [9] [5]. Analysts note that unless volumes allowed are tightened and enforcement strengthened (including permit auctions, fixed cap reductions and robust verification), the scheme’s current price trajectory may not be sufficient to drive deep emissions cuts — the IMF and World Bank analyses referenced by commentators suggest substantially higher prices would be needed to align with Paris targets [3] [11].
4. International friction: CBAM, WTO and competitiveness narratives
China is responding to the EU’s Carbon Border Adjustment Mechanism (CBAM) both diplomatically (WTO objections) and by strengthening domestic carbon mechanisms to produce compliance-grade accounting for exporters; regulators require large factories to verify emissions data to meet CBAM rules, making the ETS part of a broader trade-defensive strategy [1] [2]. Commercial and strategic agendas are visible: state-owned giants lead many CCER projects, and government timing of allocations (e.g., pre-allocation changes) shapes market liquidity and seasonal trading patterns [1] [7].
5. Persistent credibility and integrity challenges
Independent observers highlight three risks: low domestic prices relative to mature markets (undercutting decarbonisation incentives), verification bottlenecks and long certification timelines, and the governance choices that allowed large pre-allocations and free permits — all of which could leave the market oversupplied or subject to manipulation unless enforcement and transparency improve [6] [7] [8]. The literature also notes revival of voluntary mechanisms requires stricter audit standards to avoid low-integrity credits; China’s CCER relaunch is being watched for the quality of projects accepted [11] [10].
6. Competing outlooks: bullish modelling vs. sober skepticism
Market modelers such as Clear Blue present a bullish path with CEA prices doubling toward 200 yuan by 2030 as coverage widens and deficits emerge [1] [2]. In contrast, policy analysts and NGOs argue current design and enforcement gaps make such rapid tightening unlikely without deliberate reforms; they point to much lower observed prices and warn that only materially higher carbon prices (estimates cited in reports suggest US$40–100/t scenarios from World Bank and IMF analyses) will deliver Paris-aligned reductions [11] [3] [6].
Limitations: available sources do not mention specific 2026–2027 legislative steps beyond the general expansion timelines and program design changes; the figures above reflect differing methodologies across providers and therefore are not directly comparable (not found in current reporting).
Bottom line: China’s carbon market now matters for global carbon accounting and trade, but whether it will drive deep domestic decarbonisation or mainly serve trade and investment objectives depends on future policy tightening, verification capacity and how China manages voluntary credit issuance — a contest between optimistic market models and cautionary critiques rooted in price, supply and governance trends [2] [6] [1].