News - Harvard Project on Climate Agreements

Assessing China’s National Carbon Market: An HPCA Conversation with Valerie Karplus, Carnegie Mellon University

    Author:
  • Doug Gavel
| July 22, 2021

Robert Stavins and Valerie Karplus

Robert Stavins and Valerie Karplus

China recently launched the world’s largest emissions trading market, but it is just one component of the nation’s ambitious efforts to curb the rise in greenhouse-gas emissions (GHGs). That was the message delivered on Thursday (July 22) by Carnegie Mellon University Associate Professor Valerie Karplus during a Virtual Forum hosted by the Harvard Project on Climate Agreements (HPCA) and moderated by Robert Stavins, HPCA Director and A.J. Meyer Professor of Energy and Economic Development.

Karplus, whose research focuses on resource and environmental management in firms operating in diverse national and industry contexts, is an expert on China’s energy system, including energy system governance and the management of air pollution and climate change. During the webinar, she praised the Chinese government’s commitment to addressing climate change, while acknowledging that sustaining those efforts will be neither simple nor easy.

“Many challenges around the [question of] can China be trusted come from the fact you had different interests operating in different parts of the system,” she said. “I would say that the intentions of the top leadership to establish a credible system can be trusted…[but] a lot of the challenges will come in the implementation on the ground.”

China’s new carbon trading system, launched earlier this month, is currently limited to the nation’s electricity sector, and includes more than 2000 power plants, but Karplus remarked that there will most likely be pressure to expand the scope of the system to other sectors in coming years to meet President Xi’s 2020 proclamation that the country will be carbon free by 2060.

“This is very ambitious because this is the first time that there has been discussion of deeply reducing emissions in China and tying that to a long-term goal,” she said. “There are plans underway to think about how all of the different energy sectors will need to change to support China’s carbon neutrality goal by 2060.”

China’s climate policies date back several decades, Karplus said, and were crystallized by the nation’s Nationally Determined Contribution (NDC), announced in compliance with the 2015 Paris Climate Agreement. This includes making best efforts to reach peak CO2 emissions by 2030, reducing CO2 intensity by 60–65 percent relative to 2005 levels by 2030, increasing the non-fossil share of the primary energy sector by 20 percent by 2030, and increasing the forest stock by approximately 4.5 billion cubic meters by 2030.

The challenge moving forward, according to Karplus, will be creating the steep drop in CO2 emissions necessary for China to meet its national climate change goals.

“China's efforts to start to address carbon emissions we should think about as a gradual and long term process, and the planning process and even action plans will also play an important role alongside efforts to address carbon through legislation targets,” she remarked. “The accounting of carbon is just now starting to happen. It’s well developed for the power sector, but for the other sectors in the [Emissions Trading System] it’s still not developed, so we need to ask how to read the tea leaves, essentially, on how different instruments will come into play and have different impacts over time.”

China’s emissions trading system actually began as a set of sub-national pilots in 2014, in parallel with a number of other efforts designed to address air pollution. The seven pilot systems eventually led to the announcement in 2017 that the country would push forward with the development of a national emissions trading system. Policymakers learned a lot through those pilot systems, Karplus remarked, which they hope can be applied to make the national system a success.

Looking forward, Karplus predicted that China’s current carbon trading system, which is a tradable performance standard, will evolve into a mass-based cap-and-trade system by 2030 and will be accompanied by several other advancements to address climate policy.

“You’re going to see a lot more electrification, a lot more renewables, a lot of directive energy policies in place alongside the cap-and-trade system, and the cap-and-trade system will evolve over time to have the function of both linking with global efforts and ambitions to provide a way of tracking and responding to other things happening in the world. And it also will help to control emissions within an ever-shrinking share of the power sector, which is fossil generation, but I don’t see the carbon market per say as being the main driver. It is one of many drivers and that’s where I think things will still be in 20 years.”

This webinar series, HPCA Conversations on Climate Change and Energy Policy, features leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government. Look for an announcement about the next Virtual Forum. You will be able to register in advance for the event on the HPCA website.

For more information on this publication: Please contact Harvard Project on Climate Agreements
For Academic Citation: Gavel, Doug. “Assessing China’s National Carbon Market: An HPCA Conversation with Valerie Karplus, Carnegie Mellon University.” News, Harvard Project on Climate Agreements, July 22, 2021.

The Author