China eyes global carbon market role via Article 6 framework: WBCSD executive

China is cautiously positioning itself for a larger role in international carbon trading, with the Article 6 framework of the Paris Agreement emerging as a potential bridge between its domestic emissions markets and a global system, said Dominic Kailashnath Waughray, Executive Vice President, World Business Council for Sustainable Development (WBCSD).

"Article 6 provides a framework for international cooperation, rather than a domestic carbon market that an individual country establishes," Waughray told Platts, part of S&P Global Energy Oct. 5. "The relevant question is how China may participate in cross-border carbon trading under the Article 6 framework."

China's carbon market, now the world's largest by covered emissions, faces the next challenge of linking its expanding national emissions trading system and emerging voluntary market with international carbon trading platforms as Beijing pursues broader integration.

That will require a careful balancing act, Waughray said, adding China would need to ensure that any international participation supports its domestic climate objectives while maintaining confidence in the integrity of its carbon markets.

International carbon trading under Article 6 has implications for national climate targets and emissions accounting. For China, any cross-border transfer of emissions reductions, therefore, needs to be authorized and regulated at the national level, Waughray said.

China has established a robust domestic carbon market, with its national ETS encompassing power generation and having recently expanded to steel, cement, and aluminum, while additional high-emitting sectors are slated for inclusion.

The country also operates a voluntary market based on China Certified Emission Reduction credits.

Waughray said the development of these markets could eventually give China a larger pool of emissions reductions and removals to draw on internationally, although that would not necessarily mean China would become a major exporter of credits.

"China could ultimately participate on both sides of international carbon markets," Waughray said.

China was previously one of the world's largest suppliers of carbon credits through the Clean Development Mechanism. Its position has shifted now as Beijing places greater emphasis on domestic carbon markets and its own climate commitments.

Whether China emerges as a net buyer or seller under Article 6 will depend on how the government chooses to integrate international carbon trading with its domestic system, Waughray said

"At this stage, it is too early to say definitively which role will dominate," he said.

Interoperability challenge

For global investors and companies, Waughray said the more important question may be whether China's market can become interoperable with other carbon-pricing systems. He said different markets do not need identical rules, but require sufficient common ground on emissions accounting, verification, transparency and safeguards against double counting.

"The objective should not be identical rules across markets, but convergence where it matters and clarity around acceptable differences," Waughray said.

That issue could become increasingly important as carbon costs filter through global supply chains.

A manufacturer sourcing steel or aluminum from China, for example, may need to account for the emissions associated with those materials while also understanding their treatment under various carbon pricing and border adjustment regimes.

For China, the commercial stakes are substantial.

Its national ETS now covers thousands of major emitting entities and billions of mt of carbon dioxide emissions. Beijing is gradually moving toward tighter emissions controls and a greater role for paid allowances, increasing the potential for carbon prices to influence corporate investment.

But Waughray cautioned that scale alone would not be enough.

For international buyers, he said, the value of Chinese carbon credits hinges on confidence that emissions reductions are genuine, additional, measurable, and not subject to double counting.

That puts data quality and verification at the centre of China's international ambitions, Waughray said.

"The practical challenge is how different carbon-market systems can work together," he said.

He said China's impact on global carbon markets will depend not only on the volume of credits it generates, but also on how seamlessly its domestic system integrates with evolving international frameworks.

Article 6 could provide that connection. For Beijing, however, Waughray said the priority would remain ensuring that international participation supports — rather than complicates — China's own climate commitments and economic transition.