China’s Carbon Market to Achieve Full Emission Pricing by 2030

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China is set to implement a cap-and-trade emissions system by 2030, aiming to reach its peak carbon emissions deadline. Under this plan, heavily polluting companies will be required to pay for emissions that go beyond permitted limits set by the government.

During the 15th Five-Year Plan (2026-2030), a nationwide carbon trading market will be developed based on overall emission caps. This system will include a mixture of free allowances and paid permits, gradually transitioning towards a fully market-driven pricing model to foster more sustainable business practices.

Additionally, there are plans to establish a voluntary carbon market aligned with international standards. This will enable companies to reduce their greenhouse gas emissions while contributing to a broader carbon pricing framework with reasonable price levels.

In the cap-and-trade structure, authorities will define an overall emissions cap, and companies exceeding their quotas will need to purchase additional allowances through the market. Until now, allowances were distributed freely based on output levels, without limiting total emissions—part of a process aimed at hitting peak emissions by 2030 and achieving carbon neutrality by 2060.

As of yesterday, the national carbon permit price settled at approximately CNY69.69 (around USD10) per ton, slightly lower than last week’s average of CNY72. Since the market’s inception, prices have increased from CNY48 to a high of CNY105 (about USD15), then stabilized around CNY70. Total trading volume has reached 690 million tons, with transaction value hitting CNY47.5 billion (around USD6.6 billion).

Since the start of this year, mandatory emission quotas have expanded beyond the power sector to include key industries such as steel, cement, and aluminum production. The plan is to encompass all major emitting industries by 2027.

Industry experts noted that the recent policy clarifies the long-term goals and development strategy of the carbon market from the central government’s perspective, helping stakeholders understand their future roles better.

One expert from Tsinghua University’s Institute of Energy, Environment, and Economy mentioned that many countries start with free allowances due to ease of implementation and lower pressure on companies. However, he emphasized that auction-based paid allowances are essential for improving emissions reduction efforts.

He also pointed out that developing effective trading strategies can allow companies to cut transaction costs by choosing between bidding for permits or buying them directly from the market.

Another expert from Renmin University of China explained that the domestic carbon market is currently not connected to international markets, which limits the use and sale of overseas carbon credits. Nonetheless, he expects international mutual recognition to become a focus as domestic regulations align more closely with global standards, including increasing paid allowances and implementing cap controls gradually.