China's Carbon Emission Rights Market in 2025: Key Insights and Future Implications
- Tseles John
- 12 hours ago
- 3 min read
China’s carbon market has reached a significant milestone in 2025, with the total value of CO2 emission rights transactions hitting 57.66 billion yuan. This achievement reflects the country’s growing commitment to controlling greenhouse gas emissions and advancing climate goals. The market now covers major industrial sectors and continues to expand steadily, playing a crucial role in China’s path toward carbon neutrality.
Overview of the 2025 Carbon Market Performance
By the end of 2025, the Chinese carbon market recorded a total emissions volume of 865 million tons. The Ministry of Ecology and Environment reported that 3,378 key polluting units participated in the allowance allocation system. These units come from sectors that are traditionally heavy emitters, such as power generation, steelmaking, cement manufacturing, and aluminum production.
The annual trading volume of CO2 emission rights reached 235 million tons, marking a 24% increase compared to the previous year. This growth in trading volume, alongside a total transaction value of 14.63 billion yuan for the year, indicates a robust and expanding market. The average price per ton of CO2 emission rights was 62.36 yuan, with the year-end closing price rising to 74.63 yuan. These prices remained within reasonable limits, balancing market demand and regulatory control.
Key Sectors Covered by the Carbon Market
The coal market, a major source of emissions in China, is now integrated into the carbon trading system. The sectors covered include:
Power generation: Coal-fired power plants are among the largest emitters and are now required to participate in emissions trading.
Steelmaking: This energy-intensive industry contributes significantly to CO2 emissions and is a key focus of the market.
Cement manufacturing: Cement production releases large amounts of CO2, making it a critical sector for emissions control.
Aluminum production: Another energy-heavy industry included in the carbon market to reduce its carbon footprint.
The inclusion of these sectors ensures that the carbon market addresses the most significant sources of emissions in China’s industrial landscape.
Market Mechanisms and Trading Activities
In 2025, the market held eight one-way auctions designed to meet the diverse needs of participants. These auctions help allocate emission allowances efficiently and transparently, supporting price discovery and market liquidity.
The national carbon market now functions as a key tool for setting a carbon price at the national level. It supports China’s climate neutrality goals by encouraging companies to reduce emissions or invest in cleaner technologies.
Regional Highlights: Shanghai and Hubei Province
Shanghai stands out as one of the earliest pilot areas to implement the carbon trading system. It has enrolled over 400 enterprises and more than 1,800 investment institutions across 28 industries, including chemical manufacturing and construction. Notably, Shanghai was the first region to include the aviation sector and remains the only one to cover shipping emissions. By December 12, 2025, Shanghai had completed its 2024 compliance obligations on time for the fourth consecutive year, demonstrating strong regulatory enforcement and market discipline.
Hubei province plays a central role in managing the national emissions registration and clearing system. It oversees more than 3,700 corporate accounts and manages about 8 billion tons of emission allowances. This volume accounts for over 60% of China’s total greenhouse gas emissions, highlighting Hubei’s importance in the carbon market infrastructure. The province also leads in implementing new policies and system upgrades to support market growth.
Implications for China’s Climate Strategy
The steady expansion of the CO2 emission rights market in 2025 signals that China is making tangible progress in controlling industrial emissions. The market’s coverage of key sectors and its growing trading volume provide companies with financial incentives to reduce emissions. This system encourages innovation in clean energy and energy efficiency.
The carbon market also helps establish a clear price signal for carbon emissions, which is essential for guiding investment decisions. By putting a cost on carbon, China can shift economic activity toward lower-emission technologies and practices.
What to Watch Next
Looking ahead, the carbon market is expected to broaden its scope to include more industries and possibly smaller emitters. The integration of sectors like aviation and shipping in Shanghai may serve as a model for national expansion. Market participants should prepare for evolving regulations and increasing compliance requirements.
Investors and companies involved in heavy industries should monitor carbon price trends closely, as these will impact operational costs and investment strategies. The government’s continued support for transparent trading and system improvements will be key to maintaining market confidence.
China’s carbon emission rights market has become a vital part of its environmental policy framework. The 2025 data shows a growing, well-regulated system that covers major polluting sectors and supports the country’s climate goals. As the market matures, it will play an even stronger role in driving emissions reductions and fostering sustainable development.
John Tseles
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