This photo taken on March 18, 2022 shows a carbon emission supervision platform in Xiong'an New Area, north China's Hebei Province. [Photo/Xinhua]

Improvements to China's carbon emission trading system are accelerating the country's green transition, supporting the move to a low-carbon economy.

China released a provisional regulation on the administration of carbon emission trading in January, which will take effect on May 1, said Zhao Yingmin, vice minister of ecology and environment, at a press conference on Monday.

"It's China's first regulation in the field of dealing with climate change, which is a significant milestone," said Zhao.

Carbon trading enables the demand side to achieve emission reduction targets, while the supply side reaps economic benefits from participating in carbon trading.

The national market has become the largest in the world, covering 2,257 key emitters with annual carbon dioxide emission of 5.1 billion tonnes. As of the end of last year, its trading volume stood at 440 million tonnes, with a turnover of 24.9 billion yuan (about 3.5 billion U.S. dollars).

Although operating smoothly, China's carbon market is still in its infancy, and its coverage of relevant industries and vibrancy of market transactions still need further improvement, said Zhao.

The regulation details the rules on mechanisms, standardizes transactions, ensures data quality, and provides a strong legal guarantee for the healthy development of China's carbon market, he said.

Zhang Yaobo, an official with the Ministry of Justice, said the regulation features the whole-process management, appropriate resilience and a problem-orientated approach.

Legislation is an important foundation for the operation of the carbon market, as well as an important basis for enterprises to trade and for relevant government departments to fulfill their work, said Zhang Chen, an official with the Guangzhou Emissions Exchange.

Compared with mature international carbon markets, the top-level design and supporting fiscal and evaluation policies of China's carbon trading mechanism still needs to be improved, and the carbon market only includes thermal power plants, which is limited, he said.

China's carbon emissions are mainly concentrated in the industries of power generation, steel, building materials, nonferrous metals, petrochemicals, chemical engineering, paper-making and aviation, which accounts for 75 percent of the total, said Zhao, noting that giving full play to the decisive role of the market in the allocation of carbon emission resources can minimize the cost of carbon reduction.

The ministry of ecology and environment began to solicit public opinion in July, 2023, on a set of draft rules regulating the trading of voluntary reductions in greenhouse gas emissions, encouraging a wider range of industries, including renewable energy and forestry carbon sinks, that cannot enjoy economic returns for emission reduction via market mechanisms to contribute to the country's dual carbon goals.

Industry insiders believe that policies related to carbon finance need to be fine-tuned, and the development and innovation of relevant products need to be improved.

The regulation encourages the extension of financial services to low-carbon transformation, and enterprises should grasp the opportunities to develop relevant financial products to effectively activate carbon assets, according to a research report from Chuancai Securities.

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