Concept and Operation of Inter-Provincial Carbon Quota Trading under the "Dual Control" System

On July 21, 2025, iGDP Senior Analyst Liu Xueye published an original article in the Financial News, exploring the concept and operational framework of establishing an inter-provincial carbon quota trading mechanism under the "Dual Control" system (i.e., the dual control of total carbon emissions and carbon intensity). The article highlights the disparities between provinces in terms of resource endowments, industrial structures, and emission reduction costs. It proposes that by establishing an inter-provincial carbon compensation mechanism, coordinated emissions reduction and cost optimization across regions can be achieved while ensuring the overall national carbon emission cap is met. The article provides a detailed discussion on the setting of trading quotas, reserve and lending mechanisms, price formation mechanisms, and synergies with green finance. It emphasizes that policy design should balance fairness, incentivization, and flexibility to efficiently promote the achievement of the "dual carbon" goals.