In order to meet its international climate change commitments, China has a choice between continuing its decades-long practice of deploying administrative policy instruments or using market-based approaches, such as carbon emissions trading. This chapter examines the gradual emergence of the national emissions trading system (ETS) for carbon dioxide (CO2) from the early experiments with sulphur dioxide (SO2) emissions trading in the 1990s, through the CO2 pilot schemes that commenced in 2013, to the announcement of a national CO2 ETS in 2017. This new national scheme will need to be designed to address the identified weakness in the pilot markets. Further, the broader question remains as to the effectiveness of such a market mechanism in a sector dominated by the state.
KeywordsCarbon price Carbon tax Emissions trading Pilot markets
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