context: MEE (Ministry of Ecology and Environment) announced they were working on expanding the carbon market beyond the current power sector only. They opened a public consultation on a new plan that would incorporate the cement, steel and aluminum industries into the carbon market, with the initial rollout scheduled from 2024–26. MEE has pointed out that participants in the market have so far been highly homogeneous, resulting in low market activity.
Including cement, steel and aluminum into the national carbon market will add another 3 bn tonnes from 1,500 units, and expand the coverage of the national carbon market from around 40 percent to about 60 percent of the national total, reports Caixin.
The greenhouse gases targeted for control in the cement and steel industries are carbon dioxide, while the electrolytic aluminum industry must control emissions of carbon dioxide, carbon tetrafluoride (CF4) and carbon hexafluoride (C2F6).
Caixin points out that EU’s CBAM (Carbon Border Adjustment Mechanism), set to be fully implemented in 2026, will cover key industries like steel, cement and aluminium. CBAM acts as an extension of the EU carbon market, requiring companies exporting products to the EU to compensate for carbon price differences.
With the expansion, PRC firms could engage in dialogue with the EU, as they will have already incurred carbon costs domestically, contends Zhang Xiliang 张希良 Tsinghua University Institute of Energy, Environment and Economics director.
Zhang argues that a more robust carbon market and higher carbon prices will better incentivise companies to cut emissions. In line with this, the Ministry of Ecology and Environment is also assessing the readiness of industries such as petrochemicals, chemicals, paper and aviation for inclusion in the carbon market, notes Caixin. Chemicals and aviation are expected to be added in 2026, followed by petrochemicals and papermaking during the 15th 5-year plan period.