From command and control regulations to a business proposition : Creating a Chinese market for emissions trading

Purpose – The purpose of this paper is to overview the development of China's emission trading, which is transforming environmental policy measures from traditional command and control regulations to business‐led decision making within government initiated environmental markets, and investigates the main factors that affect China's policy making with regards to further climate changes. Design/methodology/approach – This paper is based on the authors' review of the literatures on emissions trading program in China and their critical analysis. Findings – Initially China's environmental protection policies were focused principally upon the reduction of sulfur dioxide (SO 2 ) emissions for improving air quality. Since the authorization of the Kyoto Protocol in 2002, project‐based activities such as Clean Development Mechanism producing carbon credit developed rapidly. However, the implementation of carbon dioxide emission trading is still under discussion and research is much inferior to that of SO 2 emission trading. The barriers of and suggestions for designing future emissions trading market are also discussed. Originality/value – This review helps to raise awareness and understand possible scenarios for emission trading in China.