Core Mechanism of Carbon Finance: The Emissions Trading Scheme (ETS)

DOI

10.2991/978-94-6239-642-5_83How to use a DOI?

Keywords

carbon finance; carbon emissions trading market; dual carbon goals; green transition; risk management

Abstract

Against the strategic backdrop of China’s "dual carbon" goals, carbon finance functions as a pivotal instrument for advancing low-carbon transformation. The development of its market-based mechanisms bears critical significance for China’s attainment of climate governance targets. This paper systematically reviews the current state of China's carbon finance market, with a focus on analyzing its challenges and opportunities, and proposes pathways to deepen its development. Research indicates that China's carbon finance has initially established an initial framework characterized by the coexistence of policy guidance and market exploration. The national Emissions Trading Scheme (ETS) has become the world's largest carbon market, yet core bottlenecks persist, including inadequate policy and regulatory frameworks, insufficient market liquidity, lagging innovation in carbon financial products, and a shortage of specialised talent. Concurrently, the capital demands generated by the dual carbon goals, the impetus for green transition, technological empowerment, and international cooperation endow the market with substantial development potential. To address these challenges, this paper proposes breakthrough pathways encompassing optimising market mechanisms (e.g., expanding sector coverage and introducing derivatives trading), promoting product and service innovation, strengthening risk management, and deepening international cooperation. The study concludes that multidimensional reforms can significantly enhance the efficiency and resilience of the carbon finance market, thus establishing it as a core financial instrument underpinning China's low-carbon economic transition.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jingyi Ma
PY  - 2026
DA  - 2026/04/29
TI  - Core Mechanism of Carbon Finance: The Emissions Trading Scheme (ETS)
BT  - Proceedings of the 2026 11th International Conference on Financial Innovation and Economic Development (ICFIED 2026)
PB  - Atlantis Press
SP  - 808
EP  - 817
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-642-5_83
DO  - 10.2991/978-94-6239-642-5_83
ID  - Ma2026
ER  -