Legal Foundations and Property Rights in China’s Carbon Emissions Trading System

Abstract

Abstract: China’s Carbon Emissions Trading System (ETS) represents a significant step in integrating market-based mechanisms into the country’s climate governance framework. Launched nationally in 2021 after a decade of regional experimentation, the ETS is designed to help achieve China’s dual carbon goals—peaking emissions before 2030 and reaching carbon neutrality by 2060. However, the system’s long-term effectiveness is heavily contingent upon the clarity and maturity of its legal foundations, particularly the definition and protection of property rights related to carbon allowances. This paper explores the legal evolution of China’s ETS, focusing on how administrative measures, environmental laws, and regulatory oversight collectively form its current operational base. It critically examines the legal status of emission allowances, the limits of administrative enforcement, and the implications for market liquidity, financial integration, and investor confidence. Ongoing challenges—such as the lack of a unified carbon trading law, underdeveloped dispute resolution mechanisms, and the ambiguous classification of allowances—are analyzed as part of a dynamic and transitional legal ecosystem. Drawing from both domestic policy discourse and international legal models, the paper offers targeted recommendations for future legal reform aimed at enhancing transparency, legal certainty, and systemic resilience. It concludes that while China’s ETS is still in its formative stage, it is on a positive legal trajectory that could shape the development of carbon markets in other emerging economies.