BEIJING, Nov 10 (Reuters) - China will explore the construction of a carbon emissions trading market in the next few years, according to new guidelines released this week to cut the country’s soaring levels of climate-changing greenhouse gases.
The State Council, China’s cabinet, on Wednesday passed a work plan on controlling greenhouse gas emissions during the 12th Five-Year Plan period of 2011-15. It includes provisions aimed at encouraging carbon trade in pilot regions and industrial sectors as well as a plan to set up a national carbon accounting system.
Following are details of schemes announced to date.
China has pledged to cut carbon intensity — the amount of CO2 produced per unit of GDP — 40-45 percent by 2020 compared with 2005 levels, and aims to reduce carbon intensity by 17 percent over the 2011-2015 period. Targets for individual provinces have already been allocated, and policy makers are also considering a national coal consumption cap.
Industrial firms are also obliged to reduce the amount of CO2 produced per unit of industrial output by 18 percent over the 2011-2015 period, and the government has been looking into sectoral cap-and-trade schemes to help them meet their goals.
After relying on administrative measures such as the forced closure of steel mills to reach its 2006-10 energy efficiency targets, China is now committed to finding market solutions to meet its 2011-2020 goals.
China has already chosen seven pilot carbon market regions — the provinces of Guangdong and Hubei and the cities of Shenzhen, Tianjin, Beijing, Chongqing and Shanghai. They are likely to face binding CO2 caps.
Following is a list of some of the regional and sectoral initiatives being discussed.
Guangdong, China’s biggest CO2 producing province, sees itself at the forefront of the country’s carbon market plans, and has already drawn up a slew of initiatives.
Located on China’s southeast coast, Guangdong aims to have a province-wide market in place within the next five years, and pilot emissions trading schemes among the power and construction materials sectors are expected to be launched by 2013.
It also plans to set a total carbon emissions cap that will then be allocated to individual sectors and cities.
It has also been discussing a trading platform that will cap energy use in the cities of the Pearl River Delta region and allow them to trade permits with one another.
Shenzhen, a special economic zone close to the border with Hong Kong, has been allowed to put forward its own separate proposals for a carbon market and aims to host its own pilot scheme by 2012.
Tianjin in northern China is already playing a role in China’s formative emissions market. The Tianjin Emissions Exchange, established in 2008, has provided a platform to trade permits for sulphur dioxide. Officials at the exchange have said it is likely to be trading CO2 credits within five years.
The China Beijing Environmental Exchange, also launched in 2008, is hoping to be at the forefront of China’s voluntary CO2 trading efforts and has been working on the creation of an internationally recognised “panda standard” for carbon credits generated by the forestry and agriculture sectors.
Shanghai, one of China’s richest cities located in the industrialised Yangtze River Delta region, also set up its own emissions exchange in 2008. It is preparing to launch a pilot CO2 platform within five years, and is now encouraging high energy consuming local industries to join a voluntary scheme.
Hubei, the site of China’s Three Gorges Dam on the Yangtze River, has also been asked to submit plans for an emissions trading platform to the central government, and has already designed formal carbon credit standards.
The municipality of Chongqing in the southwest, which is home to around 30 million people, is also drawing up plans.
But others not on the central government’s list of pilot trading regions are also trying to get in on the act, including Jiangxi and Hunan in central China, coal-rich Shaanxi in the north and the port city of Dalian in the northeast.
The Outlook Weekly magazine, run by the official Xinhua news agency, estimated last month that there were more than 100 entities across the country trying to establish their own carbon markets, with regions and private enterprises hoping to benefit from being early starters.
China is hoping to put a system in place that will measure the CO2 emissions from industrial sectors such as steel, cement and power generation, with a view to creating sectoral emissions trading schemes.
A scheme being considered for the power sector will provide emissions permits to individual power plants and encourage them to trade with one another if they exceed their own quotas.
Researchers have also been looking at mandatory sector caps, an emissions permit trading platform for state-owned enterprises and voluntary exchanges for private firms. (Reporting by David Stanway; Editing by David Fogarty)