March 16, 2015 / 10:29 AM / 4 years ago

China scales up pilot carbon trading markets

BEIJING (Reuters) - The Chinese provinces of Gansu and Anhui are among several regions now working to set up carbon exchanges, but it remains unclear how the new CO2 trading platforms will be integrated into a nationwide scheme set to start next year.

China’s seven existing pilot carbon schemes force around 2,000 firms to buy permits to cover their emissions. Premier Li Keqiang vowed last week to “expand the trials for trading carbon emissions rights” to combat climate change.

But the growing number of mostly autonomous exchanges, each of which has its own separate trading rules, could cause more headaches for regulators designing the national market.

Two cities in northwest China’s Gansu, home of some of the country’s biggest wind farms, have now been given the go-ahead by the provincial government to launch a pilot carbon exchange this year, official local news portal reported on Monday.

Local authorities plan to extend pilot markets in the cities of Jinchang and Jiuquan into a province-wide scheme, although formal launch dates have not been set.

As well as Gansu, Anhui province, Hangzhou in Zhejiang province, and Qingdao in Shandong are planning their own initiatives.

The National Development and Reform Commission (NDRC), which is designing the national CO2 scheme, is in favour of a unified market that imposes caps on major industries like power generation, but regulators are discussing how the existing pilot markets will fit in.

One possibility is to obligate all the provinces under a national cap but leave options open for the jurisdictions to be included gradually into the national system, but the alternative is to widen coverage by launching more regional pilot schemes, which can finally be linked together once the nationwide market becomes fully functional in 2020.

While the final decision is pending approval from cabinet, the existing markets are determined to go their own way and widen coverage into more sectors.

One difficulty is the different thresholds at which firms are forced to participate in the schemes.

Shenzhen’s pilot market is about to be widened into the transportation sector, the fist time traffic emissions have been covered in China, and it could bring around 400 new companies into the scheme, Ge Xingan, vice director of Shenzhen’s China Emissions Exchange, told Reuters.

But Shenzhen, China’s smallest market, sets a threshold of just 3,000 tonnes of CO2 a year, less than one third of the levels set elsewhere, and in the new nationwide scheme, the coverage threshold could be as high as 26,000 tonnes, according to Jiang Zhaoli, an NDRC official.

Reporting by Kathy Chen and David Stanway; Editing by Jeremy Laurence

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