ABSTRACT
This chapter explores the role of various causal drivers – international diffusion and, as a complementary explanation, domestic conditions – and how these affected both the decision to launch a carbon market and the design process. There is an extensive literature on the development of China's carbon market that focuses on the current status of the pilot projects and the national market. The concept of emissions trading as a feasible mechanism for controlling emissions in China gradually gained the support of the central government. The adoption of an emissions trading systems (ETS) was also influenced by domestic factors. The chapter presents the different design elements and the reasons for these choices. These elements are: Type of system and start date, Economy-wide ambition level 1, Coverage (Sector, gases and emissions), Allocation mechanism, Offsetting, Monitoring, reporting and verification (MRV) and enforcement, Price/quantity management and Revenue earmarking. The chapter discusses more overall tendencies of drivers for design.
