China’s Carbon Markets: Prospects and institutional barriers

Abstract

The potential scale of China's emission trading schemes has raised prospects for a regional carbon trading network. However, the Chinese carbon markets rest upon a unique political-economic context and institutional environment that are likely to limit their development and viability. This article offers an overview of such structural economic and political constraints, and discusses the main challenges to the development of carbon markets in China. It is based on an extensive review of official policy documents, published research papers, and relevant news reports. The article is divided into two main sections. The first one elaborates on the national policy context in which China's carbon market and pilot ETSs are situated. The second explains the structural hurdles to the development of domestic carbon markets. Implications are discussed in the conclusions.