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Is China ready for cap-and-trade?

Can countries without national curbs on greenhouse gases adopt emissions trading schemes? It’s a debate that splits China’s environmental entrepreneurs. Cao Haili reports.

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China’s policymakers are beginning to accept the use of market mechanisms to achieve goals on addressing climate change and reducing energy use. There are currently three major exchanges in China that trade environmental and energy assets, in Beijing, Tianjin and Shanghai. All were set up with support from local governments, and all began operations in the past year.

Unlike the exchanges in Beijing and Shanghai, the Tianjin Climate Exchange is a joint enterprise. Its shareholders include: CNPC Assets Management, a subsidiary of China National Petroleum Corporation; Tianjin Property Rights Exchange; and the Chicago Climate Stock Exchange. The Tianjin exchange decided early on to adopt the “cap-and-trade” model used by the Chicago exchange – an emissions trading model where members adopt a voluntary, yet legally binding commitment to meet greenhouse-gas reduction targets.

Before entering the Chinese market, the Chicago exchange had already branched out into Europe, Australia and Canada. Its founders were confident that they could replicate Chicago’s model in China. “We feel China’s circumstances are similar to those of the United States, in terms of introducing a voluntary emission reduction method,” said Dai Xiansheng, chairman of the Tianjin exchange. “Just because China hasn’t adopted emissions caps doesn’t mean we are not reducing emissions. If US companies reduce their emissions, then Chinese firms face pressure to do the same.”

The Tianjin exchange launched a voluntary emissions trading programme for businesses in early September. The programme aims to measure, report and verify carbon dioxide emitted by businesses: companies sign legally-binding agreements to reduce their emissions growth (though not their absolute emissions). Twenty Chinese firms were selected for the first stage.

But according to the people behind the Beijing Environmental Assets Exchange (BEAE), China still has a long way to go before it can really embrace the cap-and-trade model.

Mei Dewen, general manager at BEAE, uses an analogy to refer to China’s climate policy environment: “Cap-and-trade is a Ferrari; but China is still a country track, and it needs a tractor.” Mei believes that “gradual reform” is the best way to develop an emissions trading market. Therefore, BEAE opted to start with voluntary emissions reduction (VER) trading: these voluntary emission reductions, said BEAE chairman Xiong Yan, occur when nations or businesses – which are not legally obliged to cut emissions – do so for reasons of corporate social responsibility, or for the sake of long-term social development.

BEAE announced their first domestic VER trade on August 5: Tianping Automobile Insurance purchased 8,026 tonnes of emissions reductions from the Beijing Green Travel Initiative for 277,000 yuan (US$40,567). This purchase was used to offset the emissions incurred in its company operations, from its establishment in 2004 to the end of 2008.

But when I spoke to Xiong this October, he admitted that the trade was a one-off. Currently, they are attempting to formulate their own carbon VER standards. For the time being, they are working on projects in the agricultural sector, rather than industry. According to BEAE, VER standards for China’s agricultural sector will be officially released before the end of the Copenhagen climate summit this week.

Lin Jian, general manager at Shanghai Environment and Energy Exchange (SEEE), agrees with the people at BEAE. They recently added VER trading, mostly for emissions-reduction projects already approved by the National Development and Reform Commission. Lin said that the model of the Chicago exchange is not entirely suited to China: while the US federal government has not committed to emissions reductions, many state governments have set binding emissions reduction targets. China’s legal system is very different.

Jeff Huang, global vice president of the Chicago Climate Exchange and assistant chairman of the Tianjin exchange, is more optimistic. He admitted that China cannot adopt the US model wholesale. However, Huang argued that China already has a cap: the binding targets on energy-saving and emissions-reduction in the 11th Five Year Plan, to reduce energy intensity by 20% by 2010 on 2005 levels. The concept of carbon intensity was not used at first, but late last month, the government announced that by 2020, China will cut its carbon intensity by 40% to 45%. Huang said that although many regard this target as too conservative, he believes the importance is that there is a number: it shows that China has made a large step in the right direction – towards an emissions trading policy.

But since its launch in September, no real progress has been made on the Tianjin Exchange’s business cap-and-trade scheme. The exchange hit major problems at the first stage: gathering data on the historical emissions of businesses. And the Tianjin exchange now appears to be starting a VER scheme. On November 17, Shanghai Jifeng Packaging announced they had entrusted the exchange to register 6266 voluntary carbon units, offsetting emissions from the company’s operations from January 2008 to June 30, 2009. As part of this exchange, Jifeng made payments to Xiamen HSE Environmental Engineering.

According to Lin Jian, although the Chinese government has announced emissions reduction targets, “there have been no fundamental changes to the trading environment.” Chen Hongbo, an assistant researcher at the Chinese Academy of Social Sciences’ Urban Development and Environment Research Centre, said that any kind of market – carbon or otherwise – needs the right conditions in order to develop. In China, the infrastructure for many markets is lacking: for example, there are issues with the legal ownership of traded emissions and a lack of third-party certification. Nor is the actual market demand known. Chen believes that the future carbon market must be a compulsory one: only when the government sets absolute caps on emissions will there be the demand.

But Xiong Yan takes a different view: whatever route is taken, he said, sooner or later China will implement cap-and-trade.


Cao Haili, formerly senior reporter at Caijing magazine, is a reporter for chinadialogue.

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评论 comments

Default avatar
匿名 | Anonymous

提前应对

限额交易是应对气候变化的大势所趋,中国必须在这个问题上提前做好准备

To prepare in advance

Cap-and-trade is the trend of climate change adaptation. China must prepare in advance on this issue.

Default avatar
匿名 | Anonymous

碳交换所和投机

若要实行可接受的排放交易,监测认证和报告(MVR)对于中国和其他国家来说将很关键。鉴于审计界物理揭露欧美主要借贷机构的数据,碳排放MVR体系可能不会发挥稳妥的评估功用。

中国的股票交易所一直以来都较易受外部影响且充斥着投机资金。

排放交易所或将受制于类似情形。他们也可能受政府政策和利益集团的左右。

不论在哪,排放交易机制似乎都趋向于回避一个核心问题,即眼下最重要的大幅减排问题。

此评论由李雅婧Emiliy Yajing Li翻译

Carbon exchanges and speculation

MVR - Monitoring Verification and Reporting - will be essential if emissions trading exchanges are to be credible, not just in China. Given the failure of the auditing profession to expose the insolvency of major lending institutions in the USA and Europe, MVR of carbon emissions is likely also to provide an unsound basis for valuation.

China's stock exchanges tend to be volatile and driven by speculative investment.

Emissions trading exchanges would likewise be subject to speculators. They would also be subject to changes in government policy and interests.

Wherever they are, emissions trading schemes seek to avoid the esssential - deep cuts in emissions which are needed now.

Default avatar
匿名 | Anonymous

为什么,为什么,为什么???

为什么中国这么做?为什么美国这么做?二氧化碳难道不是食物来源吗?这不是个好主意。目前并没有可靠的科学证据…全是政治问题。让我们纯粹来关注科学、详查真正的问题所在。哥本哈根是个反资本主义的玩笑;而且很尴尬。当然,气候变化真实存在,而且气候总在变化。人类为什么不能像普通动物那样去适应它?如果气候正在变暖的话…这又是什么坏事吗?有些人像戈尔一样,在大街上到处宣称世界将要走到尽头,仅此而已。中国很聪明,谨慎地说它要做些事情,而不是只会取笑其他什么也不打算做的伙伴。印度也如此。所有这些都有很大的扶植腐败的可能性。

此评论由李雅婧Emiliy Li Yajing翻译

WHY WHY WHY???

WHY would China do this? Why would America do this? Isn't Carbon Dioxide Plant food??? This is all a very bad idea. The science is not there... it's all political. Let's all focus on REAL science and REAL issues. Copenhagen is an anti-capitalism joke. It's all very embarrassing. Of course climate change is real, climates are always changing. Why can't man adjust just like the animals do. And if it IS warming... is that really a bad thing? People like Al Gore are nothing more than a guy walking along the street saying the world will end. China is smart to just say they will do stuff but just laugh at the rest of the world and not do anything. India too. There is so much potential for CORRUPTION in all of this!

Default avatar
匿名 | Anonymous

中国的cap and trade框架什么时候能实现?

大家都在谈论欧洲或者美国的限额排放贸易机制,说了那么好处和不足,也指出在中国实施的条件不足,我希望大家能谈论下假设中国真的实施限额排放贸易机制的话,应该怎么做。

When will China's cap and trade framework be implemented?

Everyone is discussing Europe or America's emission trading schemes, its benefits and inadequacies, and saying that conditions aren't right for implementing it in China. I hope everyone can hypothetically discuss the possibility of China actually implementing a cap and trade scheme, and how it would be done.

Default avatar
匿名 | Anonymous

中国国内开展碳排放面临的主要问题

目前来讲我们所说的碳排放都是针对于欧美市场的排放权交易,对于中国而言国内的碳交易发展还没有初步形成,目前确实存在很多不确定的因素和特别是在政策层面的,我认真国内开展碳排放权交易需要一下三个前提:
1. 有关权威机构或者行业协会对于行业设定的基准线,及排放的标准时什么。
2.独立的第三方的核查和核证。
3.一个跨部门的监管和监测机构,这个机构必须涵盖环保、发改、工商等,用以协调各部门统一行动,并具有强制力,同时量化排放的标准。

The main problems which China confronts in the development/unfolding of their domestic carbon emissions

At present, the carbon emission we are talking about are all directed at emissions trading in the European and US market. For China the development of domestic carbon trading has not taken shape yet. Currently there really are a lot of uncertain issues, especially at the policy level. I believe that the development of China's domestic carbon emissions trading is dependent on three premises:

1. An industry baseline and a stardand of emissions defined by the relevant authorities or industry associations.

2. Verification and certification by an independent third party.

3. An interdepartmental supervising and monitoring organization which necessarily covers environmental protection, development and reform, industry and commerce etc., and can coordinate various departments in unified action. It also has coercive power and at the same time quantifies emission standards.

Default avatar
匿名 | Anonymous

面对现实......

中国拥有大量煤炭资源,而中国的天然气仅够满足其化工产业的需要。中国现在已经计划在未来的20年里,建立比世界上任何国家都要多的核电站。然而,即便是在中国,核电的成本也是普通火电站发电的5倍。中国现在是世界第二大石油消费国,但从人均来讲,每个中国人消费的化石燃料仅是美国人的六分之一。 想让中国或印度在未来的20年里减少化石燃料的消费,简直是做梦。我们应该停止对中国和印度的说教了。就像一个印度人在哥本哈根说的:“对于一个开SUV的国家来说,它怎么有理由要求一个骑自行车的国家别盼望拥有摩托车?”还是面对现实吧。中国和印度不会也不应该削减化石燃料消费。天啊,二氧化碳在大气中仅占0.04%。这也是为什么32000名美国科学家相信二氧化碳永远不可能带来什么全球灾难。自己查查吧。IPCC报告中关于物理层面的内容,仅有不到600名科学家参与,而且决定了这个报告的内容仅是这其中的60人。所谓“人为因素导致的气候变化”不过是一个骗局。

Get reall...........

China has lots of coal. China has only enough Nat. Gas to satify its chemical industry. China already has plans to build more nuclear power in the next 20 years than any other country. However, even in China, nuclear power plants costs 5 times what a coal plant costs. China is now the second largest user of oil in the world, On a per capita basis, each Chinese person uses only 1/6th the fossil fuel as is used in the USA. Anyone who thinks that China or India will reduce their consumption of fossil fuels in the next 20 years is clearly dreaming. We need to stop lecturing China and India about this. As one Indian man in Copenhagen put it... "how dare a nation of SUV drivers try to tell a nation of bicycle riders that they can never hope to own a mopeds?" Get reall.. China and India will not and should not curtail their consumption of fossil fueld. Geeezzz CO2 is less than 0.04% of the Atmosphere. That is why 32000 American Scientists believe that CO2 could never cause a global catastrophe. Do some homework. Less than 600 scientists contributed to the IPCC section on the physical science and only 60 of those decided what was included in the report. AGW is a hoax.