Optimizing the rolling out plan of China's carbon market

Although China has developed the world's largest carbon emissions trading scheme (ETS), there is no official documentation explaining how the current sectoral coverage plan was determined and what sectoral rollout plan is preferred. Here, we contribute to the policy development of the world's largest carbon market by suggesting a priority list of industries be covered in the ETS. We estimated marginal abatement cost curves using a database of more than two million firms covering over 500 four-digit industries that account for more than 97% of total industrial emissions, and simulating various carbon market scenarios including thermal power, 13 designated, and an additional 50 industries that have high emissions or are covered in other ETSs. Our analysis suggests that the cement industry should be the next sector to be included in China's ETS. In our revised list, the average abatement cost can be reduced by 39.5-78.3% compared with the business-as-usual scenario.

Automated summary

Despite the lack of official documentation on the determination of the current sectoral coverage plan and preferred sectoral rollout plan of China's ETS, this study suggests a priority list of industries to be included. Using a comprehensive database, we estimate marginal abatement cost curves for over 500 four-digit industries, which account for more than 97% of industrial emissions. Our analysis highlights the cement industry as the next sector to be included in China's ETS, with potential cost reductions of 39.5-78.3% compared to the business-as-usual scenario.