Environmental policy has become a priority in China, in part due to widespread concerns over air pollution and climate change caused by cars and coal-fired power plants.

China’s government has begun to put a strong emphasis on curbing CO2 emissions. The country plans to spend $363bn on renewable power capacity by 2020 and has a leading presence in renewables investment abroad. It has also moved to cap its coal capacity, ban petrol and diesel cars (albeit without a firm date), increase industrial energy efficiency and improve air quality.

Its climate pledge ahead of the Paris Agreement included a goal to peak CO2 emissions by “around 2030”, and make “best efforts” to peak earlier. It also plans to source 20% of its energy by 2030 from non-fossil sources (this stood at 13% in 2016). Other goals include a decrease in the carbon intensity of its economy and an increase in forest stock volume.

China is already set to overachieve on its aim to peak emissions by 2030, according to Climate Action Tracker (CAT). However, CAT also notes that these targets are far from being in line with the Paris Agreement, which commits countries to limit global warming to well below 2C and pursue efforts to limit it to 1.5C.

China’s trading scheme, therefore, comes in the context of a wide range of climate policies. One 2016 comparison of the potential for 35 environmental policies in China to drive down emissions found carbon pricing would be the most effective.

However, with little confirmed about how it will work (see below), it is hard to judge its possible impact.

Yep, there are lots of things to get excited about in terms of China’s energy, climate and innovation policies. Its ETS really isn’t one… https://t.co/wHytdRCWxk — Sam Geall (@samgeall) December 19, 2017
Li Shuo, an energy and climate policy analyst for Greenpeace East Asia, tells Carbon Brief the real question is how much the country will overachieve its goals and if the ETS plays any role. As is the case for the EU ETS, there will be debate over whether the China ETS itself drives emissions reductions, or merely mops up after all the other related policies.

For example, Swartz says coal plant closures will result from other regulations. He says:

“The ETS is a transitory policy tool that sends a market signal for companies and investors to shift away from heavily polluting sources.”

Max Dupuy, senior associate at the Regulatory Assistance Project, says other policies may have more of an influence on carbon emissions in the near term, as the ETS develops over time. He tells Carbon Brief:

“There are a lot of things that are going on and they all have interlocking effects and they will, in turn, interact with the emissions trading scheme.”


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