In an initial “simulated” trading period of the ETS, companies will be issued free emissions permits. Under the plan’s loose timeline, auctions for permits would begin around 2020.
Once payments begin in the power sector, it is companies that would foot the bill, not consumers. This is because power prices are set by government regulators in China.
However, a process to reform electricity pricing in China (see next section), already underway for several years, could allow the carbon price to be passed on to consumers in future. Dupuy tells Carbon Brief:
“There’s still quite a way to go before we can say that the power sector’s been reformed and transformed to a model where the true costs, including emissions costs, are really flowing through to end users.”
Prices for other industries are set by the market rather than government regulation, so once the ETS expands outside the power sector, it could have an impact on consumers.