Transparency, one of the keys for China to successfully establish the world’s second largest emissions trading scheme

Transparency is one of the keys for China to successfully establish the world’s second largest emissions trading scheme, in Guangdong.

This province and four Chinese cities have launched carbon markets, with two more pilots due to be launched over the next few months, and some experts, like Frank Jotzo, a professor at the Australian National University’s Climate Change Institute, have showed his concern about its proper functioning.  . “It is crucial for any emissions trading scheme to publish reliable and timely information about how many permits are issued and will be issued in future years, and how this compares to previous emissions levels”, he said. “Otherwise markets are in the dark about the likely stringency of the scheme, and pricing is a guessing game,” he remarked.

When the European Union launched its emissions market in 2005, allocation was based on companies’ own estimates of their historical emission levels. When it became clear that those were vastly exaggerated, prices plummeted from 30 euros to just a few cents. Because of this experience, now China must be learn about that.

And, for that reason, another expert, Rob Elsworth, an analyst with London-based environmental think-tank Sandbag, advised Chinese officials to be transparent. “The point we stress is that without making the data transparent it will be difficult for anyone other than those who have access to evaluate how the pilots are functioning.”

The pilot schemes in China regulate around 700 million tonnes of carbon dioxide per year, more than South Korea’s annual total emissions. Under the schemes, hundreds of power generators and manufacturers must buy permits in the market if they emit climate-changing gases above a certain allocated quota.

 

 

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