Asia's Carbon Markets Strategic Imperatives for Corporations 2025

Overview: a journey of evolution 1.2 China – the world’s largest carbon market China’s carbon market, the world’s largest by emissions coverage, has evolved over a decade, integrating global expertise with local context. Its roots lie in extensive participation in the Clean Development Mechanism (CDM) under the Kyoto Protocol, which provided valuable carbon market experience. Drawing on global carbon market models, significant adaptations of a dual-track system were made to align with China’s economic and industrial realities. The system is composed of both compliance and voluntary carbon markets, promoting the development of new technologies and decarbonization. As illustrated in Figure 2, this journey, which began in 2011, was marked by iterative experimentation. These steps refined mechanisms and built capacity to align global practices with China’s needs.The 2020 “dual carbon” goals – peaking emissions by 2030 and achieving neutrality by 2060 – further strengthened the policy framework, cementing the carbon market’s strategic role. As of 2025, the national ETS regulates over 8 billion tonnes of carbon emissions, covering 60% of industrial emissions.17 This pragmatic evolution has created a unified national market, advancing China’s climate agenda. Meanwhile, China’s carbon market fully recognizes the complexity and difficulty of low- carbon transformation. It is a delicately designed system for balanced development and emissions reduction, which can provide a wealth of experience for developing markets. Development history of China’s carbon market (2011-2025) FIGURE 2 2011Policy guidance The National Development and Reform Commission (NDRC)1 issued the "Notice on Launching Carbon Emissions Trading Pilot Work” and appr oved 7 pr ovinces and cities to carry out carbon trading pilot work. Regulations Measur es published to systematically r egulate the process of China’s Certified Emissions Reduction (CCER) project emissions r eductions from generation to transaction.2012 20132014 20152016Methodology development The NDRC successively issued 200 methodologies for voluntary gr eenhouse gas emissions r eductions, including 174 transformed fr om the UN’ s Clean Development Mechanism (CDM) methodologies, while 26 were newly developed. Piloting From June 2013 to June 2014, 7 provinces and cities3 launched carbon market pilot pr ojects. In 2016, Sichuan4 and Fujian established local exchanges outside the pilot ar eas.2017Course correct The NDRC suspended the acceptance of application for CCER methodologies, pr ojects, emissions r eductions, verification and certification, and trading institutions. 2020 & 2021 Integration with ETS National certified voluntary emissions r eductions can be used to of fset the payment of carbon emission quotas.2022 & 2023Revision & relaunch In October 2022, the Ministry of Ecology and Envir onment2 mentioned its intention to r evise the Interim Measur es for CCER trading. China’s CCER market was r elaunched in January 2024. 2024 2025 Regional pilot phaseNew era: National unified carbon market with regional innovation attemptsETS industry expansion Formal announcement of ETS expansion to cover 8 carbon intensive industries by 2030: power, steel, cement, electrolytic aluminium by 2025 (~8 billion tonnes); petr ochemicals, chemicals, papermaking and aviation by 2030. Notes: 1. The NDRC (a ministerial department) oversees economic and industry policy frameworks, guiding carbon market alignment with national targets . 2. The Ministry of Ecology and Environment (MEE) of the People’s Republic of China is the primary regulator of carbon market operations. 3. Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong and Shenzhen. Shenzhen is a city in Guangdong province, but is treated as a separate pilot area. 4. Sichuan’s carbon exchange only carried out CCER transactions. Source: Bain & Company analysis. Asia’s Carbon Markets: Strategic Imperatives for Corporations 10