China’s carbon trading market will encompass the steel and aluminum sectors

By Metal miner

It has been in the works for some time. China is finally ready to add metal industries such as steel and aluminum as well as cement to its national carbon trading market. Conformable media reportsthe change will take place by the end of 2024.

Essentially, this means that domestic producers of steel, aluminum and cement will soon have to pay more for their carbon emissions. By including these three industries, China hopes that reducing emissions will help soften the impact of a new EU carbon tariff, CBAM, which comes into force in 2026.

For those unfamiliar with the carbon trading market, it basically allows the buying and selling of carbon credits and renewable energy certificates. The core principle is part of the ongoing effort to protect the environment and help nations meet their climate goals.

For many countries, carbon trading is a key policy for reducing greenhouse gases such as carbon dioxide through market-based approaches. Chinese leaders see the effort as highlighting the country’s ongoing goal to peak carbon emissions by 2030 and achieve carbon neutrality by 2060.

Why is there a need to include more industries?

For several months, China has been actively considering including steel and other metal industries in its domestic carbon trading market. With the passage of time, the country also appealed to the development of public opinion guidelines around emissions accounting and verification for the country’s cement sector.

According to data from the Ministry of Environment, the national compliance market currently only covers the power generation sector, which contributes about 40% of China’s total CO2 emissions. China’s mandatory carbon market includes about 2,200 electric utilities, but its effectiveness in reducing pollution has been limited by low carbon prices and taxes. To improve this, China plans to expand the three-year-old market to cover seven more sectors. Overall, the country aims to include 70% of its total emissions by 2030.

Several other countries in Asia and Latin America have established or are in the process of establishing carbon credit markets. According to a report on global greenhouse gas emissions by the International Carbon Action Partnership (ICAP), these nations see this market as crucial to helping them achieve their domestic climate goals.

Meanwhile, China’s share of emissions covered by binding carbon markets, which currently stands at 60%, continues to grow over the next few years, impacting both policy research and trade.

The industrial metal will join the carbon system by the end of the year

This increase will occur for two reasons. First, as developed countries such as the EU, US, Canada and Germany reduce emissions, the global share of emissions covered by their carbon markets will shrink. Second, China’s domestic carbon market will soon expand beyond the energy sector. By adding the steel, cement and aluminum industries, the country will cover another 2-3 billion tons of CO2.

Furthermore, national carbon markets are about to become much more interconnected. Currently, most countries remain focused on reducing domestic emissions. However, this will change as international carbon markets emerge under Article 6 of the Paris Agreement and more countries introduce carbon taxes on high-emitting imports.

to inauguration ceremony at the 2024 Global Energy Transformation Conference, China’s Minister of Ecology and Environment Huang Runqiu emphasized the need to accelerate China’s green and low-carbon development. This makes it almost inevitable that the country will add several key emitting industries to the carbon trading system, including industrial metals such as aluminum and steel.

According to the report, the minister said that in the decade ending in 2023, China has maintained average annual economic growth, while increasing energy consumption by 3.2 percent each year and reducing energy intensity by 26.1 percent. . During this time, the share of coal in primary energy consumption fell from 67.4% to 55.3%. Huang also proposed three key strategies to accelerate China’s transition to green and low-carbon development.

By Jennifer Carey

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