China is poised to extend its national carbon market by compelling major polluting sectors such as steel, aluminum, and cement to participate in emissions trading by 2025. The move is part of Beijing’s broader efforts to meet its ambitious climate goals, including peaking carbon emissions by 2030 and achieving carbon neutrality by 2060. The carbon market, initially launched in 2021 with a focus on the power sector, will now target heavy industries, which are some of the largest contributors to the country’s greenhouse gas emissions.
The upcoming expansion reflects China’s determination to pressure key industrial sectors to accelerate their decarbonization efforts. According to officials, steel production, a notorious emitter, has been identified as a priority in this new phase. By next year, these sectors will face compliance obligations to either reduce their emissions or purchase allowances under the market-based trading system. This measure is expected to provide both an economic incentive and a regulatory push for industries to adopt cleaner technologies, fostering innovation while driving down emissions.
Since its inception, China’s carbon trading scheme has encountered criticism for setting overly generous emissions allowances, which limited its effectiveness. In response, the government plans to tighten the cap on emissions as it incorporates these new sectors. This regulatory shift comes at a time when international pressure is mounting on China, the world’s largest carbon emitter, to take more aggressive climate action.
The expansion of the carbon market will align with a series of industrial reforms aimed at energy efficiency and pollution control. The cement industry, for instance, is already facing a significant overhaul, with authorities targeting a 13-million-ton reduction in carbon dioxide emissions by 2025. Cement clinker production, in particular, is set to undergo ultra-low emissions transformation, with expectations that half of the industry will meet these standards by the same year.
