China to start work on national carbon market in 2015

By John Parnell 

China’s proposed national carbon market will not launch in 2015 as originally suggested after the country told the World Bank it will not begin work on it for another two years.

Beijing’s 12th Five-year plan for 2011-2015 announced that once seven regional pilot schemes were underway, a national market would follow.

But at a recent meeting of the World Bank’s Partnerships for Market Readiness (PMR), which helps countries to establish carbon trading programmes, China indicated work would only begin in 2015. Regional pilots are underway in several cities and provinces.

“There is a proposed schedule for development of Chinese carbon market: during 2011-2015, pilot program is the focus; from 2015, establishment of national market,” it said in a presentation given by Wang Shu, deputy director of China’s National Development and Reform Commission (NDRC).

A government official contacted through an intermediary said: ”National carbon market is unlikely to be completed in 2015.” RTCC understands that this is now also the expectation among carbon asset managers working in China.

Regional emissions trading pilot schemes are under way in China with the national carbon market to follow

This is also in line with comments by the Minister responsible for climate change Xie Zhenhua at a conference last year who said the China-wide scheme would be developed by 2020.

This amounts to a reinterpretation of the 12th Five-year plan whereby 2015 is the start not the end date for the policy’s development.

China is the world’s largest emitter of greenhouse gases. Its growing middle classes are increasing its demand for power which is currently being met largely by coal power.

Measures to incentivise lower emissions are part of the country’s longer term plan to move away from a manufacturing to a knowledge-based economy.

The document presented at the PMR also confirmed that talks on a carbon tax in China, that would place a fixed charge on emissions, are ongoing.

“For carbon tax, there is no confirmed schedule, and disagreement still exist and it is still in process of study and coordination.”

A spokesperson from China’s tax authority recently confirmed that a greenhouse gas levy would be integrated into existing pollution regulations, much the same as the US Environmental Protection Agency (EPA) has done for coal power plants.

Delay anticipated

A report by the Stockholm Environment Institute (SEI) published in April 2012 speculated that the 2015 deadline for a national scheme could prove too ambitious.

SEI acknowledged the attempts were “sincere and ambitious” but that there were a number of difficulties ahead.

“The delay was very much anticipated,” Guoyi Han, research fellow at SEI and one of the authors of last year’s report told RTCC.

“There are fundamental reasons embedded in the complexities of setting up a fully functional, market-based trading mechanism in a still heavily government intervened economic system. Others are technical and capacity relate,” he said.

“Still others might be circumstantial such as the slowdown of the economic growth last year in China. That may have eased the urgency on carbon emission control.”

Han said the challenge facing China is to find a way to make a system modelled on international set-ups such as the EU’s Emissions Trading Scheme (ETS) that is designed to operate within the Chinese context.

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