CHINA plans to implement a cap?and?trade emissions system by its 2030 carbon?peak deadline, requiring heavily polluting firms to pay for emissions that exceed state?imposed limits, according to a recent document from the General Office of the State Council. The government intends to establish a national carbon trading market based on total emissions quotas during the 15th Five?Year Plan (2026–2030). The scheme will combine free and paid allocations initially, with a gradual shift toward full market?based pricing to strengthen incentives for emissions reductions and promote greener business practices. In parallel, authorities will develop a voluntary carbon market for companies seeking to cut greenhouse?gas emissions beyond regulatory requirements. That market will be aligned with international standards to help build a more comprehensive carbon?pricing framework with rational price levels. Under the cap?and?trade model, regulators set an aggregate emissions cap and firms emitting above their allocated quotas must purchase additional permits. To date, China’s allowance regime has relied largely on free allocations tied to output, without an overall cap on total emissions; the move to cap?and?trade therefore represents a major evolution in market design and policy ambition as the country pursues peaking by 2030 and carbon neutrality by 2060. The carbon permit price on the national market closed Thursday at 69.45 yuan (about US$9.72) per ton, slightly below last week’s average near 72 yuan. Since launch, prices have ranged from an initial 48 yuan per ton to a peak of 105 yuan, before settling around 70 yuan. Cumulative trading volume has reached 690 million tons of allowances, generating a turnover of 47.5 billion yuan. Since the beginning of this year, mandatory quotas have expanded beyond the power sector to include key industries such as steel, cement, and aluminum smelting. The latest plans call for comprehensive coverage of all major emitting industries by 2027. Industry observers welcomed the policy document for clarifying the market’s positioning, long?term objectives and development pathway, helping market participants better understand future roles and compliance obligations. Zhang Da, director of the Institute of Energy, Environment and Economy at Tsinghua University, noted that many jurisdictions start with free allocations because they are easier to implement and ease the immediate financial burden on enterprises. He said transitioning to auction?based, paid allocations is ultimately necessary to improve the efficiency and effectiveness of emissions reductions. Pang Jun, dean of the School of Ecology and Environment at Renmin University of China, pointed out that China’s domestic carbon market currently remains unlinked to international carbon markets, preventing the use or sale of overseas carbon credits. He suggested that as domestic rules align more closely with global norms — including the adoption of cap control and a larger share of paid allocations — international mutual recognition and market linkage should become priorities to expand liquidity and enhance price discovery.(SD-Agencies) | 