China’s policymakers have recently set a clear trajectory for the development of its national carbon market, targeting 2030 – the year it has promised to reach its carbon emissions peak – in a policy document released by the State Council, the country's highest executive body,  in late August.

The document lays out the first-ever carbon market policy at the central government level, outlining two key objectives for the national emissions trading system ( ETS ) – broader industry coverage and a transition from intensity-based to quantity-based emissions control.

First, the policy envisions expanding the ETS by 2027 to encompass major industrial sectors, including steel, building materials, non-ferrous metals, petrochemicals and chemicals. The ETS, since its launch in 2021, has covered the power sector and was further extended in early 2025 to include cement, steel and aluminium smelting. These four sectors collectively account for approximately 60% of China’s total carbon emissions.

Second, the policy aims to implement absolute emissions caps for regulated sectors by 2030, which is a more stringent and binding approach compared with the current intensity-based system. This shift is expected to better incentivize companies to reduce emissions and enhance the role of carbon-related financial instruments, such as carbon forwards and futures.

China’s ETS is already the largest in the world. As of the end of August, it recorded a cumulative trading volume of over 695 million tonnes of carbon emissions, according to data from the Shanghai Environment and Energy Exchange, with a total transaction value of 47.8 billion yuan ( US$6.7 billion ).

In addition to the ETS, the policy also expands the scope of the China Certified Emission Reduction ( CCER ) scheme. Operating on a voluntary basis, the CCER complements the ETS by promoting greater transparency, standardization and broader participation in carbon trading.

Price discovery is at the core of carbon market and carbon trading. The ETS and CCER, following the latest blueprint, are expected to improve the pricing mechanism for carbon emissions in China and support the country’s ambition to build a unified, nationwide carbon market, accelerating its progress toward its 2030 carbon peak goal.