In mid 2021, China launched the world’s largest carbon trading platform and called it “TPS” which stands for Tradable Performance Standards. It works by allowing high intensity carbon emitting companies to purchase offsets to their carbon emissions by paying companies on the other side of the scale, namely companies who have an unused carbon allowance budget that they want to sell on the carbon market. It’s almost like transferring the carbon emissions of high intensity emitters to low-emitters or non-emitters at a punitive cost to the high emitter. The idea being that the punitive cost acts as an incentive to reduce emissions intensity thereby reduce the expense.

The Chinese government expects this system to spur significant changes in the emissions outputs of its highest polluters and account for half the emissions reductions it needs to meet its 2060 Net-Zero goal. To read more about China’s new carbon market, check out the article on the topic posted by CGTN here.