China's current pilot schemes for carbon-emissions trading are the forerunners to a nationwide carbon market slated for 2016 (Nature 498, 145–146; 2013). This has prompted international speculation that China might adopt an absolute cap on national emissions by 2020. We contend that future Chinese climate policy is unlikely to rely mainly on cap and trade, and so will not depend on the success of pilot schemes.

In our view, the schemes are not likely to deliver a carbon price that reflects its social cost or provides an incentive for long-term investment in low-carbon technologies. The government may bring in other instruments in parallel (such as carbon taxes or mandatory emissions standards), which would distort the carbon price in China as they have in Europe.

The Chinese government should not allow the carbon prices emerging from its pilot trading schemes to distract attention from the real costs of moving to a low-carbon economy.