Abstract: Historically, to avoid rapid increases in carbon prices that could hinder economic growth and hurt employment, China has preferred to use fiscal subsidies to provide financial support and incentives for lowcarbon transition. However, in terms of expanding carbon markets, ensuring access for participants, and diversifying trading products, China has proceeded cautiously. It has adopted relatively loose carbon quota allocation standards to control supply-demand gaps and prevent rapid price increases.
There is no need to overly worry about carbon price increases. Compared to fiscal subsidies, carbon quota trading combines the functions of “carrot and stick,” providing stronger incentives for emissions reduction by enterprises. Providing subsidies to low-emission enterprises through carbon market trading is a more transparent, efficient, and sustainable mechanism, which rarely causes international disputes.
Therefore, China should overcome concerns about carbon price increases, accelerate the expansion of the national carbon market, improve carbon quota allocation mechanisms, and strengthen market-based incentives for low-carbon transition. This will not only help achieve the dual carbon goals but is also an important measure to advance marketization, achieve high-quality development, bring China’s green practices into better alignment with international standards, and showcase its commitment to high-level opening-up.
