WHAT IS EXPECTED to be China’s largest and the world’s second-largest carbon trading market has opened for business. First-day’s trading on the China Emissions Exchange in Guangzhou was roughly double the opening day’s volume on its predecessors in Beijing, Shanghai and Shenzhen.
Exchanges in Chongqing and Tianjin, and the province of Hubei are planned to follow in the next few months as Beijing clamps down on CO2 emissions from heavy industry. Beijing is planning to run the seven exchanges for three to five years as pilots for a national scheme.
Companies have to have a carbon permit for every tonne of carbon dioxide emitted. Most permits will be issued for free initially, but companies will have to pay for 3% of their expected emissions in the first year of the scheme, with that percentage gradually rising in the future. The Guangdong scheme covers the province’s big power generators, cement, iron and steel producers, a group of 242 companies that have been capped at 350 million tonnes of CO2 emissions. Textiles, pulp and paper and metals industries will be added later.
When all the carbon trading markets are up an running they will regulate 800 million tonnes of emissions, equivalent to Germany’s annual emissions. Beijing’s goal is to cut its greenhouse gas emissions per unit of GDP to 40-45% below 2005 levels by 2020, not just to limit the effects of climate change, but also as part of its drive to become more energy efficient and to deflect the negative criticism that comes with being the world’s biggest polluter.