Industry Trend Analysis - Impending ETS To Remain In Learning Phase - JAN 2018

BMI View: Despite continued concerns over the scope, pricing and enforcement of the impending national Chinese carbon market, the launch of the country's ETS will ultimately be an important development to address domestic carbon emissions in the world ' s largest emitter. Notably, the launch of the scheme will also continue to drive wider policy momentum and increase the global prominence of market-based mechanisms to reduced greenhouse gas emissions.

The impending launch of a national Carbon Trading Scheme in China continues the momentum in global usage and prominence of carbon pricing (see ' Risks Rising From Carbon Pricing ' , October 17). The roll out of what is likely to be the world's largest Emissions Trading Scheme (ETS) will ultimately carry implications for industrial players in China specifically, but also in global supply chains, as Chinese companies address efficiencies in light of a new market cost of emitting carbon.

From a wider political perspective, the launch of a national carbon market in the country which is the world's largest emitter of greenhouse gases and a key player in world trade has the potential to influence further momentum in scaling up climate action through carbon markets. The wider momentum and pervasiveness of a market price of carbon emissions will threaten the long-term viability of a range of companies with a high exposure to the upper end of the carbon price curve i.e. companies with core businesses in highly carbon-intensive activities such as coal-fired power production, tar-sands production or cement manufacturing.

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