China’s national carbon market is expanding for the first time, with steel, cement, and aluminum smelting industries joining the system.
Original By NLS
China’s national carbon market is expanding for the first time, with steel, cement, and aluminum smelting industries joining the system. The Ministry of Ecology and Environment (MEE) officially announced the move on March 26, releasing the Work Plan for Including the Steel, Cement, and Aluminum Smelting Industries in the National Carbon Market.
Currently, China’s carbon trading system covers only the power sector, with 2,200 major emitters accounting for over 5 billion tons of CO₂ emissions annually. Since its launch in July 2021, the market has remained stable, helping reduce overall carbon intensity in power generation by 8.78% and cutting emission reduction costs by about 35 billion yuan.
“Steel, cement, and aluminum smelting are among the biggest carbon-emitting industries, releasing about 3 billion tons of CO₂ annually—more than 20% of China’s total emissions,” said Pei Xiaofei, MEE spokesperson and Director of the Department of Publicity and Education. “With this expansion, an estimated 1,500 additional major emitters will be included, bringing total market coverage to over 60% of the country’s CO₂ emissions. The market will also begin trading three greenhouse gases: CO₂, perfluorocarbons (PFCs), and hexafluoroethane (C₂F₆).”
The expansion will be implemented in two phases. From 2024 to 2026, the system will gradually integrate the new industries, followed by a refinement phase starting in 2027. “As for carbon allowance allocation, which is a key concern for these industries, we will continue using an intensity-based approach,” Pei explained. “In 2024, steel, cement, and aluminum smelting firms will receive allowances equal to their verified emissions. In 2025 and 2026, overall allocations will be balanced across industries, ensuring that no company faces extreme shortages or surpluses. From 2027 onward, we aim to establish a clear and transparent industry-wide cap and gradually tighten allocations to drive further reductions in carbon intensity.”