China Considers Launch of Carbon Trading Scheme

Expectations are growing in the run-up to global climate talks in Germany this week that China is preparing to launch a

national carbon trading scheme.

Xi Jinping, China’s leader, said two years ago that Beijing would launch an emissions trading system in 2017 that would
almost certainly become the largest of its type.

With time running out, government officials, industry experts and researchers at Chinese think-tanks say Beijing could
announce the scheme at the two-week Bonn climate change meeting that opens on Monday.

The expectations come as Beijing signals its readiness to fill the gap in global climate leadership following President Donald. Trump’s decision to withdraw the US from the Paris climate change deal.

“We are expecting the launch of national ETS in conjunction with the Bonn climate conference,” said Li Shuo, senior
campaigner for Greenpeace East Asia, referring to an emissions trading system.

It is unclear how extensive or effective the scheme will be given what analysts said were problems with pricing and
monitoring.

Problems have bedevilled China’s preparations to build a vibrant scheme that would allow the biggest corporate polluters to buy credits from those that do not emit as much.

A policy document outlining the design of the market has been approved by the powerful National Development and Reform Commission and is now awaiting approval by the leadership, said Mr Li.

China is the world’s biggest source of climate-warming greenhouse gases but has pledged to cap their growth by about 2030 through the use of cleaner energy. If the scheme is a success it will reinforce China’s claim to global climate leadership.

“China wants to be a leader in a global sense on climate change and green technologies,” said Paula DiPerna, special adviser for CDP North America, an environmental charity. “And there is also a vacuum to fill with the US pulling out of the Paris accord last year.”

In a sign of how Chinese companies are preparing for mandatory carbon trading, a CDP survey found that the number of businesses that were using an internal carbon price has risen strongly in recent years.

Nicolette Bartlett, director of carbon pricing at CDP, said the number of Chinese companies implementing or planning such a move has risen from 54 in 2015 to 73 last year and 102 this year. Some 336 companies in China responded to CDP’s questionnaire.

Beijing has in recent weeks shown stronger intent at the grassroots level, launching an unprecedented crackdown down on heavy polluters, mandating that some of the biggest steel and coal producers nearly halve production this winter.

Households in China’s industrial heartland have been equipped with natural gas heaters this year to reduce dependence on dirty coal-fired generators.

Reliance on coal-fired power has already been declining steadily as China makes a push into developing renewable energy capacity in wind, hydropower and solar. Although new coal-fired capacity has continued to come online, additional capacity has been at its lowest since 2004, according to Greenpeace.

When plans for a national emissions trading scheme were announced in 2015, policymakers identified eight industrial sectors, it would target in its first stage, such as petrochemicals and iron and steel. However, that list was shortened in May to power generation, aluminium and cement.

Experts now say the first stage of national carbon market will probably only cover power generation, though that represents a significant proportion of China’s carbon emissions.