What is the significance of “Carbon Trading” in addressing global climate change?


China launched its national carbon trading market on July 16 after years of preparations. Its initial phase includes over 2,000 power companies that collectively constitute approximately 6 percent of global emissions, or a little more than a fifth of China’s entire emissions, which stand at an estimated 27 percent of the world’s total. It’ll eventually scale to include other industries with time, thus increasing the percentage of China’s emissions that will be regulated through this structure. As of its launch, it’s already the world’s largest carbon trading market. The first deal was sealed at 52.78 yuan ($8.16) per ton, with total 160,000 tons of emissions worth 7.9 million yuan traded. Data provider estimated that in 2030, when China reaches its carbon emission  peak it would rise to 160 yuan a ton. This is undoubtedly a historic development because it represents the most serious effort by any single country, let alone the world’s largest greenhouse gas emitter, to combat climate change.

So what actually is carbon trading? Who are the major players? How the carbon emissions priced? And what is the significance of this measure in addressing global climate change?

In a Carbon market what actually traded is Carbon Quota. For each company government allows an amount of emission. If a company manages to curb its own carbon emissions it can sell the excess permits on the carbon market to profit, If it emit more carbon emissions than permitted, then it has to buy extra allowances from other market players to be covered. Allowing carbon emissions to be traded like a commodity works on “Cap and Trade” principal. It gives economic incentives for companies to cut their own carbon emission and invest in clean technology. It is seen as an effective mechanism to incentivize sustainable carbon reductions.

At present there are a number of carbon trading markets around the world at national or regional level. For example in 2020 the very first profitable full year in Tesla’ history was clearly boosted by the surge in carbon credit sales. The company earned 1.58 billion dollars from the sales of these credits in 2020, without it, it would be another year of losses.

The Emissions Trading Scheme was rolled out in February after seven pilot schemes were set up across the country. This move complements China’s existing position as the world’s largest producer of renewable energy and confirms its green leadership and is a befitting reply to all false claims spewed by some foreign media and officials that China doesn’t care about the environment

Climate change affects every country and they each have to do their part to make a noticeable difference for the future. China is leading the way in this respect by setting the perfect example for others to follow. The experiences that it will obtain and subsequently share with others will be a priceless gift to humanity since everyone else can learn from its management of the world’s largest carbon trading market. With time, the rest of the international community will launch their own carbon trading markets too.The uncontrollable consequences of climate change will not only worsen everyone’s living standards, but also kill countless people too, whether directly or indirectly. We have to understand that if the climate continues to spiral out of control, mankind cannot continue taking advantage of recent medical and technological advances to improve everyone’s lives. Combating climate change is therefore the world’s number one priority.

By leading from the front through its shining example, China hopes to inspire everyone else to follow its lead. Just like it trains its many partners in various industries as part of its responsibility to the world through the Belt & Road Initiative (BRI) of comprehensive integration towards a community of shared future for mankind, so too is it expected that China will train them on the best ways to manage carbon trading markets. In other words, everything that China is doing is consistent with its pragmatic and socialist vision of helping humanity. China’s BRI partners will eventually incorporate more green practices into their economic strategies through their own carbon trading markets and the inclusion of green technologies in their existing industries. The global reach of this network of connectivity projects means that that it’ll make a meaningful difference in combating climate change with time. This is especially the case since many BRI countries are from the Global South, have rapidly growing economies, and still largely rely on fossil fuels.

In this situation of combating the climatic emergency, the world should celebrate the historic launch of the largest carbon trading market. By responsibly regulating emissions to protect the environment for future generations, China’s carbon trading market sets an important precedent for everyone else to follow. It’s not just China’s pride, but a Pride of entire international community since it will gradually improve the living standards of humankind.

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