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Carbon Trading in China: Progress and Challenges

March 2016

Citation: 46 ELR 10194

Issue: 3

Author: Patrick Parenteau and Mingde Cao

China and the United States deserve a great deal of credit for the successful outcome at the Paris Climate Agreement talks. Their landmark 2014 agreement committing each nation to reduce emissions and promote cleaner energy sources inspired a record number of nations to submit their intended nationally determined contributions to climate mitigation and adaptation. This commitment was underscored by the joint statement issued by President Xi Jinping and President Barack Obama at the United States-China Climate Summit in September 2015, in which China announced that it will enact a national emission trading system (ETS) in 2017 covering power generation, steel, cement, and other key industrial sectors. Yet the 2017 timetable to implement a national trading system is extremely ambitious. China has yet to enact legislation authorizing a national ETS system and there are many other obstacles to overcome. This Comment will review the progress to date and identify the challenges ahead, including institutional capacity; allocation of allowances; carbon accounting; monitoring, reporting, and verification; and financial regulation to control price volatility.

Patrick Parenteau is Professor of Law at Vermont Law School. Mingde Cao is Professor at China University of Political Science and Law.

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