Guangdong carbon market in China begins working

China began trading in Guangdong’s carbon permit market, which is expected to be the world’s second-largest market after the European Union in terms of carbon dioxide emissions covered. It is far larger than either the Australian or Californian emissions trading schemes.

The Chinese government has approved seven pilot carbon trading exchanges in total, with Shenzhen being the first to launch in June followed by Beijing and Shanghai. However, Guangdong, which is home to over 100 million people and has an economy larger than Indonesia, far outweighs the other pilot projects launched to date.

Aside from being the largest carbon market to operate in China yet, Guangdong is also the first to use auctions to distribute emissions permits, rather than offering them all initially for free.

The debut trade on the China Emissions Exchange in Guangzhou went through in line with market expectations at 61 yuan ($10.04), with cement firm Hailuo buying 20,000 carbon permits from the new energy arm of state-owned power producer Huadian Energy Co Ltd.

Xie Zhenhua, vice director of the National Development and Reform Commission, China’s economic planning agency, said the carbon markets will “play a very significant role” in China’s efforts to reduce its carbon emissions. China has vowed to reduce its carbon emissions per capita of GDP, known as emissions intensity, by 40–45 percent by 2020 compared with 2005 levels.

Guangdong’s carbon scheme caps CO2 emissions from 242 of the province’s major power generators and cement, iron and steel producers at 350 million tons per year, with a further 38 million tons set aside in reserves for new entrants and potential adjustments.

Companies are forced to pay for 3 percent of their expected emissions in the first year of the scheme, with that share gradually rising in the future.

Also, the Guangdong government said that it would expand the market to cover five new sectors, including textiles, paper production and metals, although it gave no timeline.

China is the world’s biggest emitter of greenhouse gases. But China is also a world leader in renewable energy, including wind and solar power. China is working hard to increase hydropower and nuclear power capabilities as well in an effort to reduce reliance on coal, and is making major economic reforms that will open energy markets to natural gas development and imports that have been priced out due to coal-power subsidies.

 

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