(Yicai) Sept. 10 -- China has released a draft plan that would add the cement, electrolytic aluminum, and steel industries to the nation’s carbon trading scheme, which would raise the market's emissions coverage to 60 percent.

Given that the basic conditions of these three major carbon-emitting industries are now mature enough, they can be added to the carbon market this year, the Ministry of Ecology and Environment said yesterday. It is now seeking public feedback on the proposal.

The market is a key plank in China’s strategy to achieve carbon neutrality by 2060. Launched in July 2021, it currently sets emissions limits for thermal power producers and allows them to buy and sell emission allowances. As of June 30, the scheme had facilitated the trading of about 465 million metric tons of carbon emission allowances, according to the ministry’s data.

The addition of the aluminum, cement, and steel industries would increase the emissions coverage to about 60 percent of China's total, a significant step in tightening regulation.

The cement and steel sectors would be regulated based on carbon dioxide emissions, while the electrolytic aluminum industry would be regulated by emissions of CO2, carbon tetrafluoride, and carbon hexafluoride, according to the draft proposal.

Only businesses in each industry with annual greenhouse gas emissions of more than 26,000 tons of CO2 equivalent would be included in the carbon market in two phases, the draft noted.

The first phase would focus on setting up and improving industrial carbon emissions management at firms and helping them familiarize themselves with the market rules. The second phase would strengthen incentives and constraints, promoting low-carbon technological innovation and optimizing resource allocation for emissions reduction.

Regarding quota allocation, the draft states that the initial phase would involve a free allocation linked to product output: the higher the output, the higher the quota. Performance appraisals would be based on carbon intensity per unit of output, thereby providing companies with an adjustment period to ensure a smooth market transition.

Editor: Futura Costaglione