1533. China Plans a Market for Carbon Permits

By Reuters, The New York Times, August 31, 2014

BEIJING — China plans to introduce its national market for carbon permit trading in 2016, a government official said on Sunday, adding that Beijing is close to completing rules for what will be the world’s biggest emissions trading program.

The nation accounts for nearly 30 percent of global greenhouse gas emissions, and it plans to use the carbon market to slow its rapid growth in climate-changing emissions.

China has pledged to reduce the amount of carbon it emits per unit of its gross domestic product to 40 to 45 percent below its 2005 levels by 2020.

It has already introduced seven regional pilot markets in a bid to gain experience ahead of a nationwide program.

“We will send over the national market regulations to the State Council for approval by the end of the year,” Sun Cuihua, a senior climate official with the National Development and Reform Commission, told a conference in Beijing on Sunday.

The national market will start in 2016, although some provinces would be allowed to start later if they lacked the technical infrastructure to participate from the outset, she said.

The Chinese market, when fully functional, would dwarf the European emissions trading system, which is now the world’s biggest.

It would be the main carbon trading hub in Asia and the Pacific, where Kazakhstan and New Zealand already operate similar markets. South Korea will start a national market on Jan. 1, 2015, while Indonesia, Thailand and Vietnam are drawing up plans for markets of their own.

The Chinese market will cap carbon dioxide emissions from sources like electricity generators and manufacturers. Those that emit above their cap must buy permits in the market.

Five pilot markets that opened in China last year saw a high degree of compliance by included emitters in their first year, although data secrecy and a tendency to hand out too many permits made them inefficient in cutting emissions.

The pilot programs are keen to attract professional trading companies to increase liquidity, and Shenzhen — the smallest of the pilot markets — recently allowed trades to be settled in foreign currencies in a bid to make trading easier for foreign traders.