Carbon trading for China’s steel?

China’s steel industry could be brought within the national carbon regime by 2025, according to experts on the market.

Carbon trading in China has been in place for two years but currently covers only the domestic power sector. The China Dialogue, which describes itself as an independent, non-profit organisation dedicated to promoting a common understanding of China’s environmental challenges, says the plan is for it to steadily expand. The steel industry accounts for about 15% of China’s carbon emissions. 

EU initiative

The authors point out that the EU’s planned Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon levy on certain imported emission-intensive products means Chinese steelmakers are increasingly concerned about the extra costs they will face when exporting to the EU. An expansion of the domestic carbon market to steel would help adjust, they say. 

‘Judging by the direction followed by governmental departments in recent years, and the views of sectoral experts, the implementation programme for allocating carbon allowances in the steel industry is expected to be completed towards the end of the 14th Five Year Plan period (2021–2025),’ says China Dialogue. 

‘The coming into force of the CBAM will have a clear impact on China’s steel exports and may also hasten the industry’s integration into the national carbon market, to avoid the additional carbon costs associated with a lack of domestic carbon pricing.’