The world's largest emissions trading system debuted with more than 4.1 million tons of carbon dioxide emissions quotas changing hands. China's national carbon market had a turnover of more than 210 million yuan worth of emissions quotas.
At its debut, the average price of carbon dioxide emissions quotas hit 51.23 yuan per ton - 6.73% from the opening price of 48 yuan per ton. The first-day closing price was higher than market expectations. Analysts said the warm reception could signal strong upward momentum in the market, which will be a boon to China's climate ambitions.
"So the first-day close may look a little bit expensive for some. Given China's targets of peak carbon emissions and carbon neutrality, the carbon market is set to rise considerably over the next few years so as to offer enough incentives to companies to cut their carbon dioxide emissions," analysts at the China Institute for Studies in Energy Policy at Xiamen University said.
According to a report from Securities Times, major Chinese energy companies such as Sinopec, CNPC, Datang Group and Huaneng Group participated in the first-day trading of the new market. Analysts said the energy sector has the highest amount of carbon emissions, which is why it is expected that players in the sector will likely be the most active traders.
The carbon market is part of China's continued effort to fight climate change. The market effectively monetizes the right to pollute by converting it into an allowance that can be sold and bought. Experts said the market is the key to achieving the nation's climate ambitions.
By limiting the amount of carbon dioxide emissions that can be released, companies are being encouraged to find new ways to become more energy efficient. The competition within the market will also force companies to adopt clean technologies. Those with unused pollution allowances can also profit by selling their excess.
Chinese President Xi Jinping previously said that he aims to transform China into an environmentally responsible superpower. China is currently the world's biggest source of greenhouse pollution, overtaking the U.S. in 2006. China has come under pressure at home and abroad to do more in reducing its contribution to climate change.
Last year, Xi signed two documents as part of the country's commitment to fighting climate change. The first document was a commitment to have the country's carbon dioxide emissions peak before 2030, while the second set a goal of China becoming fully carbon neutral before 2060.