What's Happening?
China has expanded its national carbon market to include heavy industries such as petrochemicals, chemicals, flat glass, copper smelting, papermaking, and civil aviation. This expansion is part of China's iterative approach to climate policy, moving from
pilot experimentation to structured integration into industrial planning. The national emissions trading system (ETS) now covers about 60% to 65% of China's national emissions, making it the largest carbon market in the world by volume. In contrast, the United States has rolled back its federal climate framework, notably with the Environmental Protection Agency revoking the 2009 greenhouse gas endangerment finding, which had been a cornerstone of federal climate regulation.
Why It's Important?
The expansion of China's carbon market signifies a strategic move towards integrating climate policy with industrial planning, potentially influencing global carbon pricing and trade dynamics. As China strengthens its climate policy, the U.S. risks falling behind in the global shift towards sustainable industrial practices. This divergence could impact U.S. industries, particularly those involved in international trade, as they may face increased carbon costs in markets like the European Union, which is implementing its own carbon border adjustment mechanisms. The U.S. withdrawal from federal climate regulation could also hinder domestic efforts to transition to a low-carbon economy, affecting long-term competitiveness and environmental goals.
What's Next?
China's carbon market is expected to continue expanding, with additional sectors likely to be included in compliance cycles by 2030. This expansion will increase the market's coverage to potentially 70% to 80% of national emissions. The U.S., on the other hand, may face increased pressure to re-establish a federal climate framework to remain competitive internationally. Stakeholders in the U.S. might advocate for renewed climate policies to align with global trends and mitigate potential trade disadvantages.
