It would cover more than 1,700 power companies and three billion tonnes of greenhouse gas emissions.
Li Gao, Director, Climate Department at China’s National Development and Reform Commission (NDRC) said trading will begin after a period of “preparatory work” and will “gradually expand market coverage” to include other high energy consuming and high emission industries.
The EU Emissions Trading System, currently the largest carbon market, covers around 1.75 billion tonnes of emissions.
Dirk Forrister, President and CEO of the International Emissions Trading Association said: “China joins a growing number of jurisdictions, such as California, the EU and South Korea, which are using market-based measures to cut climate emissions in a cost-effective and efficient way.
“China will have the world’s largest carbon market, drawing lessons from these other markets to ensure that it works in harmony with other national policies.”