China prepares its cement companies to onboard national compliance carbon market

China will kick off a 6-month simulated trading of compliance emission allowances, or CEAs, for cement companies, starting from November, to prepare the sector for real emission trading, Hubei Emission Exchange said on its official social media account late Oct. 10.

Along with the simulated trading, a series of trainings will also be jointly provided by the Hubei exchange, who hosts the carbon registry of the national compliance market, and China Building Materials Federation, a state-backed industry association.

The trainings will cover topics such as carbon asset management, compliance price analysis, trading strategies, risk management and the use of voluntary carbon offset, according to the statement.

This move signals that China is making the final push to officially onboard the cement sector into its national compliance market. Nowadays, only the power sector has been enrolled into the country's national carbon market.

China is the world's largest cement producer and accounts for about 55% of global cement production, official data showed. As such, putting a price on the sector's emission is a crucial move both for China and the world's decarbonization journey.

The Hubei exchange said the simulated trading will be aligned with the real trading procedures, so cement companies will learn to prepare their emission reports, get the reports verified, open their accounts in the simulated registry, get their emission allowances issued, and trade them through a simulated trading platform to meet their compliance obligations.

Establishing a domestic carbon pricing regime is also expected to help cement companies to better cope with external carbon tariffs, especially EU's carbon border adjustment mechanism or CBAM, which has entered into force since Oct. 1.

China's CEA price hit a new high on Oct. 10, reaching Yuan 79.09/mtCO2e ($10.84/mtCO2e), official exchange data showed.