Energy Insider: China’s Carbon Market Expands to Cover More Industries, Aluminum Smelters Urged to Cut Emissions

In this week’s Caixin energy wrap, several crucial developments in China’s climate and energy sectors are examined, focusing on policy changes, industrial progress, and international projects. Notably, China is expanding its national carbon emissions trading market by incorporating the steel, cement, and aluminum smelting industries, marking a major development in the country's strategy to combat climate change. This expansion increases the market's coverage to over 60% of the nation's total carbon dioxide emissions by introducing approximately 1,500 major emitters from these sectors into an existing system that has seen participation from 2,200 power companies since 2021. New gases like tetrafluoromethane and hexafluoroethane will also enter the trading system. This move aims to address high emissions in these sectors, which contribute over 3 billion tons of carbon dioxide equivalent annually, accounting for more than 20% of China's national total. Authorities believe this will better capture the true cost of carbon, aiding the country's transition to low-carbon energy sources[^1][^2][^3].

In policy developments, China’s energy regulator has proposed new trading rules for green electricity certificates (GECs). The proposal sets guidelines for the issuance, transfer, verification, and cancellation of GECs, distinguishing between tradable and non-tradable types. Certificates from wind, solar, and similar renewable sources supplying electricity to the grid, along with new hydropower units, are deemed tradable. In contrast, older units and standalone operations will have certificates for internal use only. The issuance of 256 million GECs in February, with 63% being tradable, demonstrates the ongoing efforts to stimulate demand for renewable energy such as wind and solar[^1][^2][^3].

China Energy Engineering Group Co. Ltd. has built the largest and most cost-effective photovoltaic plant in the Middle East, the Al Shuaibah solar power station in Saudi Arabia, which began operations in February. This 2.6-gigawatt project, located south of Jeddah, spans 52.5 square kilometers and stands out for producing electricity at the world's lowest reported price for solar power, 1.04 U.S. cents per kilowatt-hour. This development not only strengthens the energy collaboration between Saudi Arabia and China but also positions Chinese solar manufacturers favorably amid global competition and protectionism[^4][^5][^6].

In another industry-focused shift, China's central government has introduced a roadmap to decarbonize aluminum production, a course of action unveiled shortly after this sector was incorporated into the carbon market. The plan mandates achieving over-the-benchmark energy efficiency in more than 30% of aluminum smelting capacities by 2027. Furthermore, at least 30% of their energy should come from clean sources, and 15 million tons of aluminum should be produced from recycled materials. With China as the largest global producer and consumer of aluminum, accounting for 60% of the total, these measures aim to enhance efficiency and sustainability in the aluminum industry[^4][^5][^6].