China has outlined a clear roadmap for strengthening its national carbon market through the recently released “Opinions on Promoting Green and Low-carbon Transformation and Strengthening the Construction of the National Carbon Market”, jointly issued by the Central Office and the State Office. The document underscores Beijing’s determination to achieve carbon peaking and neutrality targets while positioning the carbon market as a central mechanism for green economic transformation.
Progress to Date
China’s national carbon market has already achieved a steady start and stable operation. Two interconnected systems currently form the backbone:
- The mandatory carbon emission trading market, covering key emitters obligated to meet reduction responsibilities.
- The voluntary greenhouse gas emission reduction trading market, encouraging broader societal participation.
By the end of July 2025, cumulative trading in the national carbon market reached 681 million tons, with a turnover of 46.78 billion yuan, demonstrating the growing role of market pricing in guiding emissions behavior. In parallel, voluntary trading has seen the registration of nearly 9.5 million tons of emission reductions across projects such as afforestation and offshore wind power, reflecting early momentum in diversifying carbon assets.
These developments highlight a gradual shift in social and corporate awareness: “carbon emissions have costs, carbon reduction has benefits.”
Medium- and Long-term Roadmap
The Opinions set clear targets for 2027 and 2030, focusing on expanding the scope, depth, and functionality of the carbon market:
- Broader coverage – Expanding industries and greenhouse gases included in trading, moving from intensity-based controls toward total volume controls.
- Quota reform – Introducing a transparent, long-term quota management system, balancing free and paid allocations, and establishing reserves to stabilize the market.
- Voluntary market development – Scaling up methodologies for key low-carbon and negative-carbon technologies, enriching market products, and integrating carbon trading with other resource markets.
- Risk prevention – Enhancing supervision, strengthening data quality, and preventing systemic risks to ensure sustainable market operations.
This roadmap combines ambition with pragmatism, recognizing the need to stimulate market vitality while safeguarding stability.
Balancing Market Forces and Government Oversight
The document emphasizes the need for a dual approach:
- Government institutions will focus on framework design, target setting, quota management, and risk control.
- The market, in turn, will unleash efficiency gains through trading, product innovation, and broader participation, generating credible carbon pricing signals.
The challenge lies in balancing “letting the market work” with “ensuring effective regulation.” Strong oversight is considered essential to prevent disorder while enabling a vibrant and liquid market.
Role of Local Pilots
While the national market expands, local pilot markets remain important as policy laboratories. They will continue to test mechanisms such as broader coverage, advanced regulatory methods, and carbon finance innovations. These pilots provide valuable lessons that can be scaled nationally, reinforcing the iterative nature of China’s carbon market development.
International Dimension
Beyond domestic transformation, the carbon market is also framed as a tool for international cooperation on green and low-carbon development. By building a credible, transparent, and internationally aligned market, China aims to enhance its influence in global climate governance while supporting the stability of industrial and supply chains.
Outlook
The Opinions present a comprehensive framework to make China’s carbon market more effective, dynamic, and globally relevant. With clear milestones for 2027 and 2030, the emphasis is on deepening institutional design, expanding market scope, and enhancing supervision.
For businesses, this means a tighter link between carbon performance and market costs, as well as new opportunities in voluntary trading and green finance. For policymakers, the challenge will be to maintain balance: fostering innovation and efficiency through market mechanisms, while ensuring the integrity and stability of the system.
Ultimately, the carbon market is positioned not just as an environmental policy tool, but as a cornerstone of China’s green economic transformation and its engagement in global climate governance.