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China's Carbon Market May Get Stricter Under a New Proposal

  • Cuts in emission allowance issuances could reduce surplus
  • Proposal would be harsher on small coal plants than large ones
Workers walk past a coal fired power plant in Hanchuan, Hubei province, China.

Workers walk past a coal fired power plant in Hanchuan, Hubei province, China.

Photographer: Getty Images/Getty Images 

Chinese regulators are mulling a deeper cut in new carbon quotas, a move that would make it more expensive to run small and inefficient coal power plants.

A Ministry of Ecology and Environment draft plan for carbon allowances for more than 2,000 power firms over 2021 and 2022 proposes that large coal plants will be given 7.9% fewer allowances per megawatt-hour generated, according to a person familiar with the document. The cut is deeper than a 1% reduction proposed earlier. It would be even harsher on coal plants smaller than 300 megawatts, which would see their benchmarks cut by 12%.