How is China’s Carbon Market Leading the Green Transition?
China is rapidly establishing itself as a global leader in climate policy innovation through its evolving National Carbon Market.
As the world's largest emitter of GHGs, China has taken proactive steps to decarbonise its economy and meet its “Dual Carbon” goals, peaking carbon emissions before 2030 and reaching carbon neutrality by 2060.
The National Carbon Emission Trading System (ETS) and the Voluntary Greenhouse Gas Emission Reduction Market form the backbone of this strategy, creating a comprehensive framework that incentivises low-carbon growth through market-based mechanisms.
A scalable and complex market
China’s ETS has moved swiftly beyond its initial scope, expanding in 2025 to include steel, cement and aluminium smelting sectors responsible for substantial industrial emissions.
This expansion brought more than 1,300 new enterprises and an estimated three billion tonnes of additional emissions under regulation, increasing total market coverage to more than 60% of national CO₂ emissions.
The transformation marks a significant shift from regulating only power sector emissions to a more integrated approach that includes multiple industrial processes and gases such as tetrafluoromethane and hexafluoroethane.
The Interim Regulations for the Management of Carbon Emission Trading, in force since May 2024, have established legal accountability, clarified trading rules and introduced penalties for data manipulation.
Together with more than 30 supporting policy documents, the framework underpins a market that is both credible and enforceable.
“China sees the economic, political and environmental opportunity that US government backsliding presents and sees carbon markets as a key way to capture that opportunity,” writes Rich Gilmore, CEO of Carbon Growth Partners.
Market performance and innovation
In 2024, trading volumes reached 189 million tonnes with a total transaction value of 18.11bn yuan (US$2.5bn), a new record.
Carbon prices peaked at 105.65 yuan/tonne (US$14.8/tonne), reflecting healthy demand and growing compliance engagement.
The introduction of new trading methods, such as one-way bidding, further enhanced market flexibility and helped stabilise prices during compliance cycles.
The Voluntary Carbon Market, launched in early 2024, is also maturing.
By August 2025, more than 2.7 million tonnes of China Certified Emission Reductions (CCERs) were traded.
These credits support projects including offshore wind, solar thermal, methane capture and afforestation.
Importantly, they provide revenue streams for clean energy developers, China Energy Investment Corporation, for example, expects to earn nearly 70 million yuan (US$9.8m) from its offshore wind project through CCER sales.
Data integrity and digital transformation
To ensure transparency and accountability, China has embedded advanced digital tools into every layer of the market.
AI and big data analytics are used to validate emissions data, identify anomalies and support real-time compliance monitoring.
For instance, the number of parameters in emissions accounting for aluminium smelting has been reduced from 11 to two, simplifying reporting while maintaining accuracy.
In tandem, capacity building efforts have trained more than 4,500 technical personnel and certified 139 verification institutions, ensuring that third-party oversight keeps pace with market growth.
These measures have not only improved data quality but also strengthened trust in China’s carbon market among international observers.
Global impact and forward momentum
China’s carbon market is increasingly influencing global climate finance and policy.
It has forged partnerships with the European Union and supported capacity-building in developing countries.
At COP29, China played a pivotal role in shaping the implementation of Article 6 of the Paris Agreement, promoting cross-border carbon trading while opposing unilateral climate-based trade barriers.
Looking ahead, China intends to expand its carbon market further, both in coverage and complexity.
By 2030, the ETS aims to regulate all major industrial sectors with a mix of free and paid allocations.
Meanwhile, the voluntary market is set to include more methodologies and project types, supported by unified standards and digital traceability.
This dual-market approach ensures both regulatory reach and flexibility, reinforcing China’s role as a frontrunner in global carbon governance.