China Carbon Trading Update: Allowance Prices Hit RMB 90/Ton — Cost Implications for Foreign Companies — Key Takeaways

On April 15, 2025, the price of carbon emission allowances in China’s national carbon market (全国碳排放权交易市场, National ETS, quánguó tàn páifàng quán jiāoyì shìchǎng) surged to a record RMB 90 per ton (approximately USD 12.4), marking a 140% increase from the start of 2024. This milestone signals a tightening cap and changing cost structure for foreign companies operating in China, especially those in power, manufacturing, and heavy industry. For a typical 1 million ton/year emitter, the carbon cost has risen from roughly RMB 30 million to over RMB 90 million in just 18 months — a profound shift in operating expenses.

What the RMB 90/ton Price Means for the Market

The national carbon market, launched in July 2021, initially traded around RMB 48–58/ton. By late 2023, prices hovered near RMB 70, driven by compliance tightening and reduced free allowances. The jump to RMB 90 reflects combined pressures: a 12% reduction in free allowance allocation for 2024–2025, increased market participation, and market expectations of expansion to cement, aluminum, and chemicals sectors later this year. Daily trading volume has climbed to an average of 600,000 tons, up from 200,000 tons in 2023. Meanwhile, the European Union Allowance (EUA) price has traded between EUR 65–85/ton, meaning China’s carbon price has nearly caught up in purchasing power parity terms.

For foreign investors, the implication is clear: carbon exposure is no longer a negligible factor. A WFOE (外商独资企业, wàishāng dúzī qǐyè) operating a power plant or industrial facility with 2 million tons of annual direct emissions now faces an annual carbon liability of up to RMB 180 million if unfilled — up from RMB 96 million two years ago. Offsetting through trading or internal abatement is essential.

Cost Implications for Foreign Companies in China

Three cost pressures directly affect foreign-invested enterprises (FIE, 外商投资企业, wàishāng tóuzī qǐyè):

1. Direct compliance costs: Sectors currently covered — power generation, aviation, some data centers — must surrender allowances for actual emissions. With free allocation shrinking by 8–12% per year, companies must purchase the shortfall at the market price. At RMB 90/ton, this adds 3–5% to total operational cost for power-intensive plants.
2. Indirect pass-through costs: Many foreign manufacturers outside the national ETS still face rising electricity tariffs as power plants pass on carbon costs. China’s grid emission factor (0.570 tCO2/MWh in 2024) means every MWh consumed carries an embedded carbon cost of roughly RMB 51. A medium-sized factory using 50 GWh/year sees an annual pass-through of RMB 2.55 million — up from RMB 1.2 million in 2022.
3. Supply chain and export exposure: As China’s carbon price rises, imported goods from China may face carbon border adjustment mechanisms (CBAM) scrutiny in the EU. Foreign companies exporting to Europe should map embedded emissions in their Chinese value chains now.

To quantify the difference: a $100 million revenue joint venture with 30% carbon-intensive cost structure could see profit shrinkage of 4–6% from carbon alone if not managed. Proactive measures — such as investing in energy efficiency, renewable PPAs, or purchasing carbon credits from China’s voluntary CCER market (国家核证自愿减排量, China Certified Emission Reductions, guójiā hézhèng zìyuàn jiǎn pái liàng) — can cut net exposure by 30–70%.

Policy Outlook and Key Compliance Steps

The Ministry of Ecology and Environment (MEE) has indicated three key developments for 2025–2026:

• Expansion of the cap to cover 2,300 companies (up from 2,162), including cement, electrolytic aluminum, and synthetic ammonia sectors, likely by Q3 2025.
• Introduction of auctions for paid allowances (up to 5% of total), which could further lift price volatility.
• Mandatory verification for companies with emissions above 50,000 tCO2/year, bringing more foreign-invested factories under direct compliance.

For foreign companies not yet registered in the national ETS, now is the time to conduct an emissions inventory. Registration requires a company seal, emissions verification report, and registration on the national carbon exchange platform (全国碳排放权注册登记系统, National Carbon Allowance Registration System, quánguó tàn páifàng quán zhùcè dēngjì xìtǒng). The lead time to complete verification and secure a trading code is 4–6 weeks. Failure to register once covered can result in fines of RMB 100,000–500,000 plus forfeiture of missing allowances — and public blacklisting.

NEXT STEPS

1. Audit your carbon exposure — Check if your Chinese entity falls under current or upcoming coverage. Use our checklist: Carbon Compliance Checklist for Foreign Enterprises
2. Evaluate offset strategies — Compare CCER credits vs. direct allowance purchases. Read our guide: China CCER Carbon Credit Market: A Practical Guide for Foreign Investors
3. Plan integrated energy and carbon management — Combine renewable procurement with compliance. See: How Foreign Companies Can Procure Renewable Energy in China

— China Gateway 360 —
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