China is moving rapidly towards a national carbon emission trading market. Currently there are seven regional carbon markets operating in China, and these will be merged into a national one in 2016.
The IETA (International Emissions Trading Association) and the French research institue CDC Climat Research, a subsidiary of the state-owned French bank Caisse des Dépôts, have published a case study with detailed information on all Chinese emission trading policies over the past six years. As in the EU, in China up to now allowances have been allocated for free and prices, interestingly enough, look a lot like those in Europe. They have varied between roughly €3 and €8 per tonne.
Although the National Development and Reform Commission (NDRC), which started China’s first official climate change policy initiative in 2007, and is in charge of the country’s climate programme, has published a framework for the national scheme, the report notes that there are still several aspects that need to be decided. For example, it is not clear yet whether China will have an absolute cap or an intensity-based cap. The NDRC has this say about the issue:
“Each of them has its own pros and cons. But generally, the absolute cap is more favorable for controlling a system’s cap when an economy is on a climbing trajectory, but it increases the abatement cost. The intensity target helps control the cost when an economy is booming, and address some problems like over-allocation and price collapse when the economy is waning. The majority of economists prefer an absolute cap. Because if the cap [were] framed in intensity terms, there would be uncertainty in the market about the number of permits available until after the GDP data for that year had been published.”
The report concludes that the Chinese emission trading scheme is unique in three aspects:
- No other ETS in the world has built itself from the bottom up using provincial- and city-scale pilot systems.
- As the largest developing country in the world, the scale at which China grapples with environmental sustainability and implementing an emissions trading system as its economy develops is unparalleled.
- A carbon intensity reduction target is very specific and allows for continued economic growth, while addressing energy consumption and emissions growth.
Full report, China: An Emissions Trading Case Study.
To follow Chinese carbon market developments more closely see the website China Carbon.
For more information on emission trading initiatives globally, note that the World Bank is a very active supporter of carbon pricing and has brought a lot of information on this together on its website here.
According to the World Bank’s 2014 report on State and Trends of Carbon Pricing gobally “39 national and 23 sub-national jurisdictions have implemented or are scheduled to implement carbon pricing instruments, including emissions trading systems and taxes. The world’s emissions trading schemes are valued at about $30 billion, with China now housing the world’s second largest carbon market, covering the equivalent of 1,115 million tons of carbon dioxide emissions. The EU ETS is the largest scheme with a 2013 cap of 2,039 MtCO2e.”