China’s Carbon Market in the Context of Carbon Neutrality: Legal and Policy Perspectives

Abstract

China’s carbon market covers a huge amount of emissions, but the effects of emission reduction in the early stages are limited. This study explores the regulation of policies and laws on the carbon market through doctrinal and empirical research in the field of law. The study reveals that although the national carbon market witnessed a considerable quota trading volume, the peak of trading is concentrated and accompanied by a high compliance rate. The total amount of quotas in the first compliance cycle is too large, coupled with a single trading product, and participants in the early stage fail to activate the carbon market, making it difficult to form the carbon pricing mechanism in the market. The legal factors behind this phenomenon are related to the total amount setting mode and the construction route from simple to complex. Based on the above analysis, this study concludes with the following path to improve China’s legislation. To comply with cap and trade, China must improve the setting mechanism of total quotas to form an investment field that participates in multiple entities; effectively play the role of carbon trading in market regulation; and guarantee smooth operation through penalty and reward coordination and a unified MRV mechanism.