The study canvassed more than 400 experts specializing in climate policy, spanning various disciplines—including economics, political science, environmental science, and law—and representing a broad geographical distribution. These experts were carefully selected based on their recognition within the academic community, demonstrated by peer-reviewed publications on relevant topics. Their perspectives were solicited on a wide range of policy design choices, including the preference for CO₂ taxation versus quota-based trading systems, the application of border carbon adjustments to international trade, and strategies for utilizing revenues generated from carbon pricing mechanisms.

One of the most salient findings of this comprehensive survey is the divergence of expert opinion based on both geographic and economic factors. While a global plurality indicated a preference for CO₂ taxes over cap-and-trade systems like the European Union Emissions Trading Scheme (EU ETS), this preference is predominantly concentrated in high-income countries such as the United States and Denmark. Experts from these regions tend to favor carbon taxes for their inherent predictability and administrative simplicity. Conversely, respondents from low-income countries, where institutional and administrative capacities may be more constrained, often view quota-based trading systems as more feasible and potentially more effective, also highlighting the advantage of cross-border quota revenue transfers.

A near-universal consensus emerges concerning the adoption of border carbon adjustment (BCA) mechanisms, with approximately 74 percent of experts across all regions endorsing the imposition of CO₂-equivalent taxes on imported goods. This approach is seen as critical in mitigating competitiveness distortions and preventing carbon leakage—a phenomenon where production shifts to countries with laxer emissions constraints—thereby maintaining the environmental integrity of national climate policies. The broad-based support is particularly noteworthy given the complex legal and logistical challenges surrounding the operationalization of BCAs. This mechanism is gaining political traction within the European Union, exemplified by the proposed Carbon Border Adjustment Mechanism (CBAM), which aims to level the playing field for domestic industries subject to carbon pricing.

The debate over the optimal use of revenues generated by carbon pricing policies reveals a more fragmented landscape. The survey data indicate strong expert support for directing funds toward green research and development (R&D), reinforcing the critical role of technological innovation in achieving deep decarbonization. Equally prominent is the endorsement of targeted financial transfers to households adversely affected by climate policy, addressing concerns of equity and social acceptability. Interestingly, fixed cash rebates to all households—a policy frequently debated in the United States—garner minimal support among surveyed experts.

The variation in opinion regarding revenue allocation aligns closely with professional backgrounds. Economists predominantly advocate for interventions that maximize economic efficiency, such as reducing distortionary taxes or targeted household transfers designed to preserve market incentives. By contrast, experts from environmental science, law, and political disciplines tend to emphasize the importance of public investment in infrastructure and innovation, highlighting differing underlying normative frameworks between economic theory and political feasibility. This dichotomy underscores the multifaceted challenges of designing policies that are both effective and politically viable.

Associate Professor Nesje emphasizes the importance of contextual tailoring in carbon pricing policy design, noting that “no one universal solution exists.” The recommendations gathered in this landmark survey reflect the complex interplay of economic development levels, administrative capacities, and institutional contexts across countries. Policymakers are thus encouraged to ground their strategies in evidence-based frameworks that integrate environmental goals with economic efficiency and social fairness to ensure robust policy adoption and sustained impact.

This study represents the most extensive attempt to synthesize expert opinion on carbon pricing policy design to date, offering an invaluable knowledge resource for international climate governance bodies and national decision-makers. The findings highlight that while consensus exists on some foundational elements, such as the preference for border carbon adjustments, significant divergence remains in other aspects, advocating for a nuanced, adaptive approach to climate policy implementation.

The survey’s robust methodology involved inviting academics with publishing records in the scientific literature on climate policy to evaluate and rank policy instruments. This rigorous approach lends credibility to the findings and underscores the importance of multi-disciplinary input in navigating the complex terrain of global climate policymaking.

Looking forward, the insights from this research hold critical implications for the evolution of climate strategies under the Paris Agreement and beyond. As nations calibrate their Nationally Determined Contributions (NDCs) and explore market mechanisms for emissions reductions, understanding the diverse preferences and constraints identified in this expert survey will be pivotal for crafting resilient and inclusive carbon pricing architectures.

In summary, the evolving global consensus underscores the centrality of carbon pricing as a climate mitigation tool, while spotlighting the technical, economic, and equity considerations that must be carefully balanced. This expansive panel of international experts illuminates pathways to enhance policy design, ensuring effective emissions reduction while fostering social equity and economic sustainability.

Subject of Research: Carbon Pricing Policy Design and Expert Consensus

Article Title: Designing Carbon Pricing Policies Across the Globe

News Publication Date: Not specified (article scheduled for publication on 25-Sep-2025)

Web References: Designing carbon pricing policies across the globe

References: Nesje, F., Schmidt, R., & Drupp, M. (2025). Designing Carbon Pricing Policies Across the Globe. Environmental and Resource Economics. DOI: 10.1007/s10640-025-01036-3

Image Credits: Mark Dixon, Wikimedia Commons

Keywords: Carbon pricing, CO₂ tax, quota trading, border carbon adjustment, carbon leakage, climate policy design, green R&D investment, climate equity, international climate governance

A recently published review article by researchers from Tsinghua University and Carnegie Mellon University, appearing in the journal Energy and Climate Management, offers an exhaustive analysis of the evolution, structure, and operational mechanisms of China’s carbon market. The research illustrates how China has adeptly combined international carbon pricing theories with its unique socio-economic context to craft a system that balances ambition with feasibility. Prominent among the features discussed is the market’s adoption of a rate-based framework rather than a traditional cap-and-trade mass-based approach, a design choice that essentially functions as a multi-sector tradable performance standard tailored to China’s industrial landscape.

China’s carbon market journey is the culmination of over two decades of evolving climate policies and regulatory reforms. Key legal foundations were laid with the Energy Conservation Law in 1997 and the Renewable Energy Law in 2005, creating a statutory backdrop for emissions reduction and clean energy promotion. The government also leveraged institutional arrangements such as integrating energy efficiency and emissions reduction benchmarks into local government performance evaluations, which ensured accountability at multiple governance levels. Together with proactive participation in the international clean development mechanism, these strategies built vital experience and capacity, setting the stage for the pilot emissions trading programs launched across seven provinces and cities starting in 2011.

The pilot programs—initiated in regions including Beijing, Shanghai, Shenzhen, and Hubei—served as vital laboratories for practical experimentation. They enabled policymakers to test different regulatory frameworks and market mechanisms, honing in on operational practices compatible with China’s economic structure and energy profile. Through regional variation and iterative learning, these pilots informed the design principles of the national carbon market and underscored the necessity of integrating China’s specific national circumstances into policy formulation. This approach contrasts with many carbon markets in Western nations that typically rely on uniform mass-based caps, highlighting the innovative nature of China’s model.

Beyond the policy groundwork, the launch of China’s national carbon market was accompanied by the release of critical regulatory frameworks, most notably the Interim Regulation issued by the country’s top administrative body. This regulation establishes a formal legal foundation for market governance and enforcement. It marks China’s first comprehensive administrative directive aimed specifically at ensuring the integrity and smooth functioning of the carbon trading platform. This legal basis is expected to enhance market transparency, bolster participant confidence, and safeguard against market manipulation or other disruptive behaviors.

China’s carbon market presently covers the power generation sector, encompassing thousands of major emitters responsible for a substantial share of the nation’s carbon dioxide output. The sectoral focus was intentionally chosen to maximize emissions coverage while maintaining manageable market complexity at this nascent stage. Within this framework, allowance allocation primarily follows a benchmarking system based on historical and industry-specific emission rates. Such rate-based allocation incentivizes facilities to improve operational efficiency and decrease emission intensity per unit of output, rather than merely focusing on absolute emission reductions.

A critical component underpinning the credibility of China’s carbon trading system is the robust monitoring, reporting, and verification (MRV) framework established to track emissions from covered entities. This system mandates rigorous data collection protocols and independent verification processes to ensure accurate emission accounting. Reliable MRV is indispensable in preventing double counting, verifying compliance, and providing data transparency critical for market confidence and policy evaluation. The commitment to MRV quality signals China’s dedication to aligning its market with international best practices and transparency requirements.

Despite its pioneering role and substantial initial achievements, the Chinese national carbon market faces notable challenges. Market liquidity and trading activity remain moderate, partially constrained by a yet-to-be-implemented phased expansion roadmap. The absence of clear transition phases for incorporating additional industries or tightening emission intensity benchmarks limits market dynamism and long-term predictability. Moreover, coordination of the carbon market with other energy and climate policies, such as renewable energy subsidies and industrial regulations, remains an area requiring enhanced integration to avoid overlapping or contradictory incentives.

Local governments represent another important dimension yet to be fully leveraged within the carbon market governance framework. While regional pilot programs demonstrated the value of localized policy experimentation, scaling these roles within a national framework poses governance complexities. Empowering local authorities to actively support the carbon market through tailored support measures or complementary policies could stimulate broader participation and compliance, promoting the overall efficacy and equity of the system.

Looking forward, the researchers emphasize the importance of phased and deliberate development of China’s carbon market aligned closely with national climate goals and socio-economic conditions. Incremental expansions in sectoral coverage and tighter benchmarking standards should be designed to foster a vibrant, effective, and influential carbon pricing ecosystem. The balance between market flexibility and regulatory certainty will be essential in maintaining participant confidence and catalyzing sustained emission reductions.

The knowledge shared in this research not only enhances transparency but also serves as a valuable resource for the international community of scholars, policymakers, and stakeholders invested in carbon pricing as a tool for climate mitigation. China’s unique approach—particularly its innovative rate-based system embedded within a framework sensitive to national development priorities—offers lessons and considerations for other economies contemplating similar market-based climate instruments.

In the broader context of global climate governance, the success or shortcomings of China’s carbon market will have far-reaching implications. Given China’s status as the world’s largest emitter, effective carbon pricing within its borders is critical to global decarbonization efforts. As such, ongoing research, monitoring, and international dialogue remain paramount to ensure China’s market not only matures internally but also contributes constructively to the evolving architecture of international climate policy.

This groundbreaking study, supported by China’s National Natural Science Foundation, was authored by Xiliang Zhang and Runxin Yu from the Institute of Energy, Environment, and Economy at Tsinghua University, alongside Valerie J. Karplus from Carnegie Mellon University’s Department of Engineering and Public Policy. Their interdisciplinary collaboration underscores the fusion of rigorous scientific analysis and practical policymaking vital for addressing one of this century’s most urgent challenges.

Subject of Research:
The development, design, and operational characteristics of China’s national carbon market and its role in achieving China’s climate targets.

Article Title:
The development of China’s national carbon market: An overview

News Publication Date:
25-Apr-2025

Web References:
Available via Energy and Climate Management journal and SciOpen platform

References:
DOI: 10.26599/ECM.2025.9400015

Image Credits:
Energy and Climate Management, Tsinghua University Press

Keywords:
China, carbon market, emissions trading system, carbon pricing, climate policy, carbon neutrality, carbon emissions reduction, rate-based system, market-based mechanisms, MRV, energy efficiency, clean development mechanism