China's domestic carbon market set for revamp; Article 6 in limbo

China's domestic compliance and voluntary carbon markets are on track for significant upgrades in 2024, notably enforcing high-level legislation, rebooting voluntary registry, and expanding compliance market to new sectors, even as the country's Article 6 implementation plan remains in limbo.

As the world's largest compliance market by emissions covered, China's emission trading scheme is expected to be upgraded this year to better support the country's carbon peaking journey. The significant improvements in price and liquidity have laid a strong foundation for market evolution.

The annual average trading price for China Emission Allowances (CEAs) reached Yuan 68.15/mtCO2e ($9.62/mtCO2e) in 2023, up 23.24% on the year. CEA trade volume was 212 million mtCO2e for the year, jumping 316%, the exchange data showed.

Meanwhile, for domestic voluntary market, called China Certified Emission Reduction (CCER) market, a smooth relaunch is expected in 2024 after a six-year pause of new project registration.

Nevertheless, whether and how China will participate in the Article 6 market remains a wild card.

China is one of the world's largest suppliers in the voluntary carbon market (VCM), but policymakers have showed great caution towards stepping into the Article 6 market.