The Chinese city of Qingdao is going to set up an emissions trading scheme

Qingdao is the latest Chinese city which is going to set up a market to reduce greenhouse gas emissions, probably next year. Qingdao, a city of 3 million people in northeastern Shandong province, is a major energy consumer as the local economy relies on heavy industry and petrochemicals.

The local government would like to cut carbon emissions per unit of GDP to 19-20 percent below 2010 levels by 2015 and, for that reason, the city now plans to impose binding CO2 caps on up to 300 of its biggest companies and launch a market for trading CO2 permits.

China’s central government has already picked seven key regions to launch pilot carbon trading schemes. The intention is to set up a national market as Beijing seeks to cut emissions per unit of GDP by 40-45 percent from 2005 levels by 2020.

Beijing, Guangdong, Shanghai, Shenzhen and Tianjin have launched markets, with Hubei province to follow next month and Chongqing later this year.

But the exact launch date of a national market is unclear, maybe in 2019 or 2020, and Qingdao is the latest of a number of big-emitting regions looking to create their own markets to deal with the twin challenges of climate change and air pollution.

The central government is reluctant to appoint more official pilot markets, but is happy to encourage other regions to set up markets as it might gain them valuable experience when a national scheme kicks in.

Setting up local markets is an easily accessible policy for local governments that have been imposed mandatory emission targets from Beijing but lack the authority to impose a carbon tax or energy consumption cap locally, said Song Ranping at the World Resources Institute in Beijing.