China launches its first emissions trading scheme

China launched its first carbon emissions trading scheme yesterday in Shenzhen, a business hub with a population of around 10 million and economic output of over AU$150 billion. By 2015, the scheme aims to reduce the city’s carbon emissions per unit of GDP by 21% compared to 2010 levels.

The pilot scheme will cover 635 industrial enterprises and 200 large public buildings, responsible for 38% of the city’s greenhouse gas emissions. Rights to about 100 million tonnes of carbon emissions will be allocated to these companies over the next three years, based on their previous emissions and industrial added values.

Enterprises that emit less than their allowance can trade their remaining carbon emission credits at 30 yuan ($5.18) per tonne at the China Shenzhen Emission Exchange. If an enterprise’s emissions exceed its allowance, it must buy credits in the market, cut its emissions or face penalties.

Phase one of the pilot scheme (over the years 2013-2015) will cover electricity generators, industrial enterprises and the building sector. Due to the high amount of emissions caused by vehicles, the public transport sector will be included later in order to promote the use of new-energy buses and taxis.

China will follow the program with another six emissions trading schemes in four cities and two provinces - Beijing, Tianjin, Shanghai, Chongqing, Hubei and Guangdong - with the aim of moving to a national scheme after 2015.

Australia’s Minister for Climate Change, Industry and Innovation, Greg Combet, said he congratulated his Chinese counterpart Xie Zhenhua, Vice-Minister of the National Development and Reform Commission (NDRC), on this important milestone in the development of carbon pricing and emissions trading in China.

“China’s actions show that the world’s largest greenhouse gas emitter and Australia’s largest trading partner is serious about cutting emissions at the lowest cost through a market mechanism,” Combet said.

With China’s pilot schemes representing a larger emissions trading market than those of California, Australia and New Zealand combined, Combet noted that the country’s plan for a nationwide scheme “will add to the strong growth of global carbon markets.”

The Australian Government will work closely with China, including Shenzhen’s authorities, to share experiences on emissions trading.