China Carbon Credit Market size was valued at USD 95.65 billion in 2022 which is expected to reach USD 328.37 billion in 2030 with a CAGR of 16.67% for the forecast period between 2023 and 2030.
China Carbon Credit Market size was valued at USD 95.65 billion in 2022 which is expected to reach USD 328.37 billion in 2030 with a CAGR of 16.67% for the forecast period between 2023 and 2030.
China dominates the carbon credit market and seems to be the biggest supplier in the voluntary compliance market. In 2021, China’s national emissions trading scheme (ETS) was fully operational. Under the scheme, the accountability for the country’s emissions includes more than 2,000 major emitters, mostly operating in the power sector in 2019 and 2020. Around 40% equivalent to 4.5 billion tons of carbon dioxide annually fall under the operational ETS across China. Unlikely the prevailing trading scheme of other nations, China’s allocation of emissions allowances is based on emissions intensity rather than disclosing the absolute units.
In July 2021, trading of China’s ETS fully commenced and is regulated firmly by the Shanghai Environment and Energy Exchange. The current regulated price for carbon ETS is equivalent to USD 9 per ton. China deliberately makes 95% of the wafer stage of the solar supply chain where the target of China is completely focused on carbon neutral goals. The government is dedicated to scaling up 450 GW by 2030 by constructing large solar and wind farms in the remote Gobi Desert.
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China’s Carbon Compliance Strategies: Building the World’s Largest Carbon Market
China, the world’s largest emitter of greenhouse gases (GHGs), has taken major strides toward regulating carbon emissions through the development of a robust Emissions Trading System (ETS). The ETS allows companies to buy and sell emission allowances, enabling a market-driven approach to reducing carbon footprints. This initiative supports China’s ambitious climate goals, including peaking carbon emissions before 2030 and achieving carbon neutrality by 2060.
Launched in 2021, China’s national ETS has already become the world’s largest carbon trading system by coverage, having traded 412.05 million tons of allowances in its first year. These allowances serve as permits granting companies the right to emit a specific amount of carbon dioxide (CO₂), with trading ensuring that emissions are reduced in the most cost-effective way possible.
China’s ETS framework is structured across two key levels:
- National ETS: Overseen by the Ministry of Ecology and Environment (MEE), it covers the power generation sector and is gradually expanding to other heavy industries.
- Regional Pilot Schemes: Introduced earlier in cities like Beijing, Shanghai, Shenzhen, Guangdong, and Hubei, these pilots continue to operate alongside the national scheme, testing policies and mechanisms that could later be integrated nationwide.
In addition to these systems, China Certified Emission Reductions (CCERs) — voluntary domestic carbon offsets — play a crucial role in compliance. Companies under the national ETS are permitted to offset up to 5% of their verified emissions using CCERs, promoting investment in low-carbon projects such as renewable energy, forestry, and methane capture.
The Shanghai Environment and Energy Exchange serves as the national trading platform for ETS allowances, while the Beijing Green Exchange facilitates trading of voluntary carbon credits and CCERs. Another major hub, the Hubei Carbon Emissions Exchange, maintains an informal registry for transactions and holdings until the national ETS achieves full operational integration.
Currently, the national ETS mainly covers China’s power sector, but expansion is underway to include seven additional industries — such as chemicals, petrochemicals, nonferrous metals, construction materials, steel, paper, and aviation — collectively accounting for 7–8 billion tons of CO₂ emissions annually.
As of 2024, 2,225 companies are registered under the China ETS, all contributing to the national targets: an 18% reduction in carbon intensity per unit of GDP by 2025 and achieving carbon neutrality by 2060.
China’s Carbon Offset Initiatives: The Role of CCERs
The China Certified Emission Reductions (CCER) program represents a key pillar of China’s carbon market, providing a mechanism for companies to invest in projects that reduce or remove CO₂ emissions. Introduced in 2012, the CCER system quantifies and verifies emission reductions across multiple domains such as renewable energy, forestry, waste management, methane capture, and rural biogas projects.
Between 2013 and 2017, 1,047 CCER projects were approved, with a significant focus on wind energy, solar photovoltaic (PV) systems, and biogas utilization. These projects not only reduced emissions but also contributed to rural development and clean energy access. However, in March 2017, the registration of new CCER projects was temporarily suspended due to low trading volumes and the need for more rigorous standards in carbon auditing and verification.
Despite the pause, there are ongoing efforts to revive and standardize the CCER mechanism, aligning it with international best practices and ensuring its integration with the national ETS.
Renewable Energy Credits: Driving the Green Energy Transition
China’s commitment to clean energy and emission reduction is strongly reflected in its Renewable Energy Credit (REC) initiatives, particularly within the power industry, which remains the primary sector covered by the ETS. Renewable sources such as wind, solar, and hydropower are critical for reducing GHG emissions, and their development is incentivized through credit systems that reward clean electricity generation.
Renewable Energy Credits (RECs) are created when one megawatt-hour (MWh) of electricity is produced from renewable sources and delivered to the power grid. These credits can then be bought, sold, or traded as intangible assets, helping companies meet sustainability goals and emission reduction commitments.
Entities can acquire RECs through four main methods:
- Unbundled REC purchases from certified markets.
- Power Purchase Agreements (PPAs) directly with renewable energy producers.
- Options or contracts from licensed energy suppliers.
- Self-generation, where organizations produce renewable power on-site and earn credits accordingly.
Green Electricity Certificate (GEC) System: Encouraging Voluntary Participation
To further accelerate renewable adoption, China launched its Green Electricity Certificate (GEC) program in July 2017. The GEC serves as a voluntary market-based mechanism encouraging individuals and organizations to purchase electricity generated from renewable sources.
Projects powered by wind and solar energy that are connected to China’s onshore grid and certified under the Feed-in Tariff (FiT) policy are eligible to participate in the GEC system. By September 2017, the GEC trading scheme had already issued 8 million certificates, equivalent to 8 billion kilowatt-hours (kWh) of green electricity — roughly equal to the average five-month residential electricity consumption in Beijing.
This success underscores the increasing awareness and participation of both corporate and individual consumers in China’s energy transition journey.
China’s carbon compliance and offset mechanisms — spanning from the national ETS to CCERs, RECs, and GECs — demonstrate the country’s comprehensive, multi-layered approach to reducing emissions. By combining regulatory enforcement with market-driven incentives, China is setting the stage for a low-carbon economic transformation.
As the ETS expands to more industries and offset markets mature, China’s role as a global leader in carbon governance will continue to strengthen, paving the way toward a sustainable, carbon-neutral future by 2060.
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