As China prepares to launch the world’s biggest carbon trading market next year, the British foreign secretary’s special representative on climate change has said he has high hopes that the scheme will help accelerate China’s transition from coal plants to wind farms, solar and nuclear power, and other sustainable energies.

“I think it is going to be very, very good for the Chinese economy,” Sir David King said last weekend during a visit to Shanghai, where he attended a meeting with the municipality on flood defense and held a lecture on climate change at East China Normal University. For the past 15 years, China has worked on a carbon emissions trading scheme that will cap the annual amount of carbon each company is allowed to release and create a market in which those whose emissions are above the limit have to purchase excess allowances from those who are below.

China’s carbon emissions, the main driver of global warming, are expected to peak in 2025 — five years ahead of President Xi Jinping’s goal of 2030, a study by the London School of Economics released last year showed.

“China is already building more renewable energy, more nuclear energy, and more alternatives to fossil fuels than the rest of the world put together. So I think China is already making that transition [toward sustainable energies], and it is making it very successfully,” King said, not long after Britain’s new government gave the green light for the Hinkley Point C power station, a controversial nuclear plant in the U.K., backed with billions of pounds from China. Last year George Osborne, then the British chancellor of the exchequer, said he wanted the U.K. to be Beijing’s “best partner in the West.”

Despite the praise and progress, China remains the world’s largest emitter of greenhouse gases, partly due to its high number of coal-fired power plants. A carbon trading scheme, King said, would offer the right incentives to accelerate this process, as “there is inertia in the system because people are used to building coal-fired stations.” Last week, China cancelled 15 new coal-fired power plants. 

Starting in 2013, China introduced pilot carbon trading programs in Beijing, Shanghai, Shenzhen, Tianjin, and Chongqing, as well as in southern Guangdong and central Hubei provinces. The programs have come under criticism due to a high fluctuation of prices for carbon allowances, which was likely due to an oversupply of allowances earmarked by the government, experts have said. Low prices largely eliminate the scheme’s monetary incentive for industries to cut their carbon emissions.

In mid-2015, the price per ton of emitted carbon ranged from 9 yuan ($1.42 at the time) in Shanghai to 42 yuan in Beijing, the China Carbon Forum found in its China Carbon Pricing Survey. In comparison, the U.K. has introduced a floor price, which was raised from 9.54 British pounds ($12) to 18.08 per ton of carbon dioxide last year.

A carbon floor price, King said, gives investors the confidence to put their money into the low-carbon sector. “That’s very important when you make decisions about how to invest in the sector,” he added.

Li Shuo, senior climate and energy policy officer for Greenpeace East Asia, said that the carbon trading scheme was an important step for China but pointed out that currently, little is known about the scheme’s design. Carbon trading experts have described the progress as “opaque.” “In principle, it’s a very good idea, but when the rubber hits the road, we will see how it works out,” Li told Sixth Tone.

Finding the right amount of permissible emissions was another critical point for creating the right incentives. Done right, Li said that the carbon emissions trading would encourage the energy sector to invest more heavily in renewable or sustainable power.

King was more enthusiastic. “I believe that China will soon have the most successful carbon market in the world,” he said.

(Header image: Workers handling coal at a mine owned by the Huaibei Mining Group, Anhui province, April 13, 2011. Wu He/VCG)