China proposes expanding carbon trading market to cement, steel, aluminum industries

China on Monday unveiled a draft plan to expand its national carbon trading market by including three major carbon-emitting industries—cement, electrolytic aluminum, and steel—seeking public feedback on the proposal.

The move would mark a significant step in expanding the world's largest carbon trading program, which currently only covers the coal-fired power generation sector. According to the Ministry of Ecology and Environment, the inclusion of these additional industries would extend the market's coverage to about 60 percent of China's total carbon emissions.

The decision follows a comprehensive evaluation of seven sectors, including petrochemicals, chemicals, papermaking, and aviation, to assess their readiness for participation in the carbon market. The ministry's assessment considered factors such as greenhouse gas emission control, industry development, pollution and carbon reduction contributions, emission data quality, and international carbon barrier requirements.

The results indicated that the cement, steel, and electrolytic aluminum sectors are prepared to join the carbon trading market this year, the ministry said.

Launched in July 2021, China's carbon trading market has facilitated the trade of approximately 465 million metric tons of carbon emission allowances, valued at nearly 27 billion yuan ($3.8 billion) as of mid-July, the ministry reported.

China's current carbon trading system sets emission limits for coal-fired power plants. After each compliance period, plants can sell any unused carbon allowances or, if they exceed their limit, buy allowances to meet the benchmark.