Foreword

China remains a steadfast actor in global green development, utilising the carbon market as a primary policy tool to accelerate economic transition and achieve its Nationally Determined Contributions. The development of the National Carbon Market is essential for allocating resources for emission reductions and advancing the Beautiful China Initiative. Following local pilot programmes launched in 2011, the National Carbon Emission Trading System (National ETS) was launched in July 2021, and the National Voluntary Greenhouse Gas Emission Reduction Trading Market (National Voluntary Market) followed in January 2024. Together, these form a comprehensive system that supports carbon peaking and neutrality goals.

Market operations remained stable and orderly

In 2025, the National ETS operated for 243 trading days with an annual trading volume of carbon emission allowances (CEAs) totalling 235 million tonnes, an increase of 24.36% year-on-year. The annual transaction value reached 14.63 billion yuan. By the end of August 2026, cumulative trading volume in the National ETS reached 961 million tonnes, valued at 65.699 billion yuan. Trading prices generally followed a downward-then-upward trend in 2025, with the year-end composite closing price at 74.63 yuan per tonne. The National Voluntary Market registered 33 projects and 17.7637 million tonnes of China Certified Voluntary Emission Reductions (CCERs) in 2025, with transaction values reaching 626 million yuan.

The institutional framework entered a new stage

The top-level design of the market was enhanced by the entry into force of the Ecological and Environmental Code of the People’s Republic of China on 15 August 2026. This is the first national legislation to establish both the allowance trading and voluntary emission reduction systems. Furthermore, the Measures for Comprehensive Assessment of Carbon Peaking and Carbon Neutrality were issued in April 2026, incorporating carbon emission control targets into national performance evaluations. Synergies were also strengthened through special action plans for energy conservation in the steel, cement, and electrolytic aluminium industries.

The carbon emission allowance management system continued to improve

Allowance allocation plans have transitioned toward intensity control, targeting a reduction in carbon emissions per unit of product by approximately 3% during the 15th Five-Year Plan period. In 2025, sectoral coverage expanded to include the steel, cement, and aluminium smelting sectors, bringing 3,378 key emitting entities under management. By 2026, this total rose to 3,680 entities, covering over 65% of national carbon emissions. The allowance surrender completion rate for the 2024 compliance year reached a record high of 99.99%.

Trading compliance management improved in quality and efficiency

A full-chain regulatory system was established to oversee market activities before, during, and after trading. In July 2025, the National ETS introduced a one-way bidding trading method to complement existing listed and bulk agreement methods. By August 2026, nine such transactions had been successfully completed. Compliance oversight also included measures to prevent the overselling of allowances by high-risk entities. Application scenarios for CCERs expanded to include carbon neutrality for large-scale events, such as the Wuxi Marathon and concerts at the National Stadium.

Data quality management continued to be strengthened

Monthly random checks of digitally recorded data were conducted through a three-tier joint review system. In 2025, approximately 5 million data entries were reviewed, raising the one-time pass rate for monthly data to 70%. Technical guidelines for the power generation sector were updated in June 2026 to refine accounting for coal combustion and fossil fuels. The qualification rate of verification reports for the 2024 compliance year reached 98.6%, and the use of networked monitoring data was increased to improve oversight effectiveness.

Digital and intelligent infrastructure achieved high-quality development

The National Carbon Market Management Platform now employs ‘Smart Supervision’ functions, incorporating over 270 checking rules. The platform makes use of large-scale artificial intelligence model technologies to improve the efficiency of supervision and data verification. By August 2026, more than 25,000 user accounts had been authorised for competent authorities, emitting entities, and verification bodies. Data security was prioritised through the adoption of optical communication and quantum encryption technologies for transmitting core registration and settlement data.

Pilot carbon emission trading markets made active explorations

Local pilot markets in Beijing, Shanghai, Hubei, and other regions continued to innovate in 2025. Hubei launched the first carbon-insurance product to complete national-level filing, while Shanghai introduced an administrative management service trust for allowances. Sectoral coverage in these pilots expanded to include data centres, air freight, and methane emissions from the papermaking and food sectors. These pilots provide valuable experience for the further refinement of the national market.

International cooperation was deepened

China actively participated in international negotiations under the Paris Agreement. At COP30 in Brazil, China, Brazil, and the European Union jointly founded the Open Coalition on Compliance Carbon Markets to promote policy communication and experience sharing. Bilateral cooperation continued with the European Union, the United Kingdom, the Republic of Korea, and Norway. Training activities were organised for officials from more than 30 countries to share China’s experience in carbon market development and data quality management.

Development outcomes became increasingly evident

The National ETS helped reduce the overall cost of emission reductions in the power sector by approximately 56.8 billion yuan during the 14th Five-Year Plan period. In 2025, China’s thermal power generation declined for the first time in a decade, falling 0.7% year-on-year, while newly installed renewable energy capacity accounted for 82.5% of all new installations. Enterprises have increasingly integrated carbon asset management into business decisions, with the average daily number of entities participating in trading rising by 68.48% year-on-year.

Outlook

By 2027, the National ETS aims to encompass all major industrial sectors, and the National Voluntary Market will expand to include all key fields. By 2030, a system based on total allowance control combining free and paid allocations will be established. China will continue to oppose unilateral carbon-related trade barriers and work towards a scientific, fair, and reasonable global climate governance system.

Milestones

Key milestones in 2025 included the registration of the first CCERs in March and the expansion of the ETS to the steel, cement, and aluminium sectors. In 2026, the adoption of the Ecological and Environmental Code in March and the issuance of new measurement capacity building guidelines in August marked significant progress in the market’s legal and technical foundations.

Appendix

The appendix provides an overview of the seven pilot markets as of the end of 2025. Notable data includes Hubei’s cumulative local allowance turnover reaching 10.519 billion yuan and Shenzhen’s coverage of 38 sectors including manufacturing and services.