China has expanded its national carbon emissions trading system for the first time, officially bringing the cement industry into the fold—a move that puts cement producers under heightened pressure to manage carbon costs.
Source: Shanghai Securities News
China has expanded its national carbon emissions trading system for the first time, officially bringing the cement industry into the fold—a move that puts cement producers under heightened pressure to manage carbon costs. “The inclusion of the cement sector marks a significant step toward phasing out inefficient production and driving high-quality growth,” said Li Kunming, an analyst at the China Cement Big Data Research Institute.
While the immediate impact on the sector is expected to be modest, industry experts believe the long-term implications could be transformative. The recently released Work Plan for Including the Steel, Cement, and Aluminum Smelting Industries in the National Carbon Emissions Trading Market outlines how emissions quotas will be allocated and regulated in the coming years. In the short term, companies are advised to strengthen compliance, invest in low-carbon technologies, and develop market strategies to navigate a regulatory environment that is set to tighten progressively.
Under the plan, allowances for 2024 will be distributed based on verified actual emissions. Starting in 2025, however, the system will shift to an intensity-based allocation model, rewarding efficient producers with more flexibility while encouraging less production from high-emission facilities. Importantly, the total volume of emissions will not be capped during this phase, allowing room for well-performing enterprises to expand output. As a result, allowance surpluses and deficits will be kept within a controlled range across the industry, ensuring general balance. “In the first year of the transition, allocations follow existing quotas. In the second year, they’re based on the previous year’s emission intensity—so the impact on production will be relatively minor,” said a spokesperson for Tapai Group.
However, industry leaders are clear that over the long term, the new framework will bring significant operational and financial implications. Tianshan Cement noted during an institutional briefing that while short-term cost pressures remain limited, the evolving carbon market will eventually reshape production models, data governance, transaction costs, and investment strategies related to energy efficiency and emissions reduction. As quotas tighten and regulatory standards become more rigorous, the mechanism is expected to accelerate the elimination of outdated capacity, shift competitive dynamics, and redefine supply and demand within the industry.
According to Li, the years 2024 through 2026 will serve as a foundational phase, allowing companies to build robust emissions management systems and gain familiarity with trading rules. From 2027 onward, the market is expected to enter a more mature stage, with quota allocation governed by a dual-control model that targets both total emissions and intensity. This shift will pressure cement companies to speed up R&D on low-carbon technologies and drive sustained reductions in emissions intensity. Against the backdrop of weakening long-term demand, these trends may ultimately support the sector’s broader carbon neutrality goals.
Li recommends a three-pronged approach for companies looking to stay ahead: improve energy efficiency and increase technology investment on the production side; build professional teams to strengthen emissions accounting and monitoring; and actively engage with carbon markets using financial tools to hedge risk and seize opportunities.
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