Legal and Policy Pathways of Carbon Finance: Comparative Analysis of the Carbon Market in the EU and China

There has been a financial trend in China’s carbon market. However, the legal and policy pathways in China have not specifically focused on carbon finance, which has led to some suspicions about the legitimacy and efficiency of the carbon market. China is following an ambiguous and complicated route in the financial market rules and specialized regime of the carbon market. Meanwhile, the EU has classified carbon emission allowances as financial instruments, and adopted financial market rules for all segments of the carbon market. On the basis of the financial regulation in the EU this paper will try to find an appropriate legal and policy pathway to carbon finance in China. Application and exemptions as regards financial market rules concerning different market participants and their behaviors will be suggested.