The Chinese city of Tianjin launched the country’s fifth emissions trading scheme

Tianjin municipality in North China began carbon emissions trading this week, with five deals for about 45,000 tons completed on the first day.

An initial 114 companies from the power, iron and steel, chemical, petrochemical, and oil and gas extraction industries have been included in the quota allocation. All the companies included have emitted more than 20,000 tons of carbon dioxide since 2009. Under the trading program, companies that emit more than their fair share of emissions will be able to buy unused quotas on the market from firms that pollute less.

Companies participating in Tianjin included units of China Huaneng Group Corp., China National Petroleum Corp., Citic Securities Co. and Hanergy Holding Group Ltd.

Tianjin is the fifth trading market started this year, following Beijing, Shanghai, Shenzhen and Guangdong.

The pilot schemes were a landmark for a China intent on building a nationwide carbon trading market. The country has pledged to reduce carbon dioxide emissions by 40 to 45 percent per unit of GDP by 2020, compared with 2005.

China takes the right steps by setting a cap on emissions and a price on carbon. Last week Guangdong, a province of more than 100 million people, and the largest of seven carbon markets planned in China, is the first region to use auctions to allocate a portion of its emission permits instead of giving all of them away for free.

The Chinese capacity to implement is well known and two more pilot trading systems are planned next year. It is too early to understand if the pilots will be effective enough to give significant reductions. But the new pilot schemes in China represent a great step forward for China and for the world’s pathway to low carbon growth.

ALLCOT