China and California’s carbon emissions trading systems are two of the world’s largest and have a longstanding collaboration. China’s national system began official operation in July 2021, building on several years of provincial and municipal pilots. California’s cap-and-trade program has been operating since 2013, and is an important component of the state’s comprehensive suite of policies to meet its 2045 carbon neutrality goal. Our research analyzes carbon markets in California and China, and potential for linkages with other regions, including identifying areas for potential subnational collaboration on carbon market design and implementation. In addition, we host technical workshops and training sessions designed to support capacity-building in this domain. 


Key Governance Issues in California’s Carbon Cap-and-Trade System

Researchers at Tsinghua University, the California-China Climate Institute, UCLA School of Law, and Wuhan University convened a series of projects and events to share ideas and best-practices and to discuss ways to improve the design and implementation of emissions trading systems. The project also included a series of private dialogues on various aspects of emissions trading system design, including on data quality; compliance; monitoring, reporting, and verification (MRV); auctions; allowance allocation approaches; offsets; and the use of financial instruments in carbon markets. Our collaboration has been guided by the goal of improving understanding of the respective emissions trading systems in China and California. Moreover, it served to explore ways to improve environmental ambition, to ensure market integrity, and to improve the policy environment for climate action. Key design considerations discussed include, among other things, setting caps and benchmarks at appropriately ambitious levels, utilizing auctions and other measures to create an effective price signal, establishing MRV and enforcement systems to ensure data quality and the integrity of emissions reductions, properly structuring offset programs, and channeling market revenues toward environmental objectives. Our dialogues included invaluable assistance from Chinese and California regulators and researchers involved in the design and operation of emissions trading systems.

Read the Mandarin version>>

Read the companion report on China National ETS from Tsinghua University colleagues>>

China Launches World's Largest Carbon Market

China’s long-awaited national emissions trading system (ETS) launched in July 2021, following prolonged anticipation. The effort was first announced in 2011, during the 12th Five-Year Planning process, as part of a broader strategy for enhancing green development. This blog describes the launch of the carbon market. 

A Pathway to Progress: Informal Linkage and California and China's Carbon Markets

This piece explores opportunities for linkage among different jurisidictions' carbon markets. 





Jenn Perron, Fan Dai

In collaboration with UCLA colleagues Alex Wang, Cara Horowitz, Daniel Carpenter-Gold, Andria So,  Tsinghua University Institute of Climate Change and Sustainable Development colleagues Prof. Zhang Xiliang and Yu Runxin, and Wuhan University colleague Qi Shaozhou.

This work is generously supported by The Berggruen Institute.