Emissions Trading in California: Lessons for China

June 8, 2022
Alex Wang, Daniel Carpenter-Gold, Siyi Shen, Andria So

This report seeks to introduce California’s experience in emissions trading to Chinese regulators and researchers in the context of broader debates over emissions trading. The report introduces California’s experience with two emissions trading systems (ETS): a statewide carbon ETS and the Los Angeles-area regional emissions trading system for SO2 and NOx, known as the Regional Clean Air Incentives Market (RECLAIM). This report seeks to move the discussion away from theoretical debates over instrument choice and toward practical questions of how to ensure that market measures can help, not hinder, achievement of climate goals.  

Analysis in this report of California’s ETS experience is guided by a focus on principles of environmental ambition, integrity, and opportunity. That is, to what extent have the trading systems advanced environmental ambition (significant emissions reductions) with integrity (done in a transparent, reliable, and durable way), while expanding opportunities for environmental protection (generating revenue, building political support for climate action, or strengthening administrative capacity)? The report offers lessons from California’s experience and specific recommendations for reform of China’s national ETS.

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The Emmett Institute is simultaneously preparing multiple reports comparing the approaches to emissions trading systems in California and China. Some of this report draws on material in a second report, Key Governance Issues in California's Carbon Cap-and-Trade Program, focusing on governance of California’s cap-and-trade program.

This report is made possible through the generous support of Energy Foundation China.

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