(Bloomberg) — China plans to impose carbon-trading compliance obligations on steel, aluminum, and cement producers next year as the country extends its carbon market to compel more polluting sectors to slash emissions.
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About 1,500 companies in those industries will be subject to market-based carbon costs from next year if their emissions overshoot government-set targets, according to a consultation paper issued by the Ministry of Ecology and Environment.
China’s three-year-old mandatory carbon market currently only includes power utilities and, like others in Asia, has been slow to compel polluters to change their behavior because of low prices and trading volumes. Emissions allowances stood at 92.84 yuan ($13.04) on Monday, compared with trades above $70 in Europe.
Extending the emissions trading scheme will help tackle low market activity and help China catch up with the European Union’s system, said Song Yutong , an analyst with the London Stock Exchange Group.
The expansion comes as China eyes other high-polluting industries for inclusion in the mandatory market, including petrochemicals, non-ferrous metals, paper, and aviation, according to BloombergNEF. That would help the world’s top emitter cover about 70% of its total emissions by 2030. Just including steel, aluminum, and cement will expand the coverage of emissions to 8 billion tons or 60% of the nation’s total, according to Song.
The move means Chinese producers of steel, aluminum and cement will soon face extra costs for emitting carbon. Companies will be allocated carbon emission quotas linked to output and without upper limits during the initial period through 2026, according to the ministry paper.
Chinese authorities hope lower emissions will help soften the blow to domestic producers from a new carbon tariff, known as CBAM, to be imposed by the EU from 2026.
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