What is driving the recent surge in China's carbon prices and how does it affect charcoal markets?

Carbon prices in China have rebounded sharply in 2026, climbing from a 2025 low of 38.48 yuan per tonne to above 90 yuan by mid-July, with intraday peaks near 100 yuan. Three forces are at play: sector expansion into steel, cement, and aluminum; tighter quota allocation with pre-allocation cut to 50%; and policy signals from the '15th Five-Year' carbon peak action plan. The market structure has fundamentally shifted—allowances are no longer storable assets but annual compliance tools, creating a seller's market. For charcoal, higher carbon costs raise the competitive bar for fossil-based reductants and fuels. Charcoal's carbon-neutral profile becomes more valuable in industrial processes, potentially supporting premium pricing. However, the immediate effect is indirect, as most charcoal applications fall outside direct carbon market coverage.