China’s regulators have proposed cutting carbon allowances as the government seeks to raise the cost of pollution on its fledgling market for trading emissions, according to a draft of the plan viewed by Bloomberg.
The existing quotas have been quite lenient to polluters, creating a surplus of allowances that has weighed on prices. Tightening the quotas so soon after the national market was launched in July suggests that Beijing is keen to step up the role of carbon trading to help meet its promise of peaking emissions by 2030 and getting to net zero by 2060.
The most stringent proposal is to cut allowances to 1% below the amount of carbon that market participants are expected to have generated, according to the draft. That marks a shift in policy as the government seeks to reduce the oversupply that has accumulated in previous years.