China gets ready for national carbon market

China is striving to cut its carbon density by 17 percent or more by the end of 2015 from that in 2010 and carbon trading will help. Carbon trading came about in response to the Kyoto Protocol, signed in Japan in 1997, aimed at slowing climate change. The protocol calls for 38 industrialized countries to reduce their greenhouse gas emissions.

China as the world’s biggest emitter of greenhouse gases, is also betting on carbon trading as a key measure to cut its emissions.

“Carbon trading is to ask the heavy emitter to pay for the cost of their emissions. But this market should have the characteristic of resilience and flexibility. Because of the market tool of control, companies will pay more attention to energy saving and try their best to promote self-innovation to effectively control carbon emissions,” said Mei Dewen, president of China Beijing Environment Exchange.

The question, then, is can the trading be transparent? Duan Maosheng, professor of China Carbon Market Center, Tsinghua University.says there are three aspects needed to ensure the transparency of the trading. First, is that the government requires the exchanges to publish transaction information, including trade volume and price. Secondly, a newly introduced third-party verification system would check on the yearly report of each entity’s emissions. Meanwhile, the allocation approach would be published, letting the entity calculate the free allowance it receives from the government.

“If they think the government has made some mistakes in the calculation process, they can go to the government and negotiate with them to debate with them,” Professor Duan said.

Carbon trading reflects a win-win conception. The trading is intended to reduce greenhouse gas emissions while offering economic benefits.