China launches national carbon trading program

China Petroleum & Chemical (Sinopec), one of China’s largest oil and chemical firms, closed the first bulk transaction on China’s national carbon market on July 21, purchasing 100,000 metric tons (t) of carbon credits to offset emissions from its own power plants.

China formally launched the carbon market on July 16 in trading centers in Beijing, Shanghai, and Wuhan. The power-generation sector is China’s first—and so far, its only—industry trading its emissions. Carbon trading allows companies to buy and sell credits, assigned to them by governments, that permit them to emit carbon dioxide.

A total of 2,225 major power plants nationwide are part of the market. Their CO₂ emissions last year were an estimated 4 billion metric tons, about 40% of China’s total. More than 30 power plants affiliated with Sinopec, PetroChina, and China National Offshore Oil can also participate in the exchange.

Zhao Yingmin, China’s vice minister for environmental protection, said at a July 16 news briefing that the country’s power-generation sector has sufficient preparation for carbon trading. Other sectors like steelmaking, construction, and chemicals will be added to the market later in China’s current 5-year plan, which runs from 2021–2025.

Sinopec made the bulk purchase from the utility arm of China Resources Group. Earlier, on the first trading day, four Sinopec subsidiaries purchased 210,000 t of emission credits under the regular trading scheme. By design, there are two trading formats in the Chinese carbon market: regular trading and bulk trading, in which the volume must be 100,000 t or more.

China’s petrochemical sector is getting ready for carbon trading. Chen Mei’an, an analyst with Innovative Green Development Program, a Beijing-based low-carbon consultancy, says she expects the chemical industry to embrace trading to help it meet the carbon reduction goals set for it by the government.

“The sector’s emission reduction is crucial to help China reach its goals of emission peak by 2030 and carbon neutrality by 2060,” Chen says. “Deeper and broader involvement in the carbon trading market will help the chemical industry improve its energy efficiency, develop new low-carbon technologies, and explore more emission reduction options.”

By the end of trading on Thursday, July 29, the price of carbon was 53 yuan ($8.20) per metric ton, 10% higher than on July 16, when the market launched. The price is much lower than the recent price of about $65 per metric ton in the European Union’s Emissions Trading System.