If the U.N.’s Copenhagen Climate Summit does only one thing, it will have been to get China to commit to its first firm target to curb greenhouse gas emissions. Unfortunately, the goal that Prime Minister Wen Jiabao will take to Copenhagen doesn’t amount to much — to achieve by 2020 a 40%-50% cut in the 2005 levels of the amount of carbon dioxide emitted for each unit of GDP produced.
Carbon intensity goals are open-ended in as much as the volume of greenhouse gas emissions is a function of growth and energy efficiency. Beijing plans to have more of both, so its total emissions will likely rise. Also the goal is in line with what is already happening in China after a five-year drive to become more energy efficient. It is already almost half way to hitting it.
That is not to say that any target isn’t welcome; it certainly is to the organizers of the flagging Copenhagen conference, who in the past 48 hours have now got the world’s two biggest polluting nations, the U.S. and China, to agree to at least nominal targets. China’s announcement is also a shot in the arm for carbon trading markets, another area where Beijing thinks it can steal a march over Washington.
Tianjin looks set to become the first of China’s designated carbon trading exchanges to be up and running in an organized way, according to a Financial Times report. The Tianjin Climate Exchange, a joint venture between the Chicago Climate Exchange, PetroChina and Tianjin’s municipal government, expects to start trading within the year.
The China Beijing Environmental Exchange and the Shanghai Environment Energy Exchange are its likely rivals. China doesn’t yet have a regulatory framework for carbon exchanges or even standardized futures contracts. (Beijing’s carbon exchange is partnering with Blue Next, a spot market; while Shanghai is experimenting with credits for local companies.) Nor does China have a national cap on emissions (a Copenhagen climate conference surprise to come?), so participation in any market would have to be voluntary, as it is for the Chicago Climate Exchange.
Cap and trade legislation may be out of favor in the U.S. (or at least politically stalled in a Washington that seems unable to get its head out of its own political sands), but China has a strong incentive to get carbon markets established. It is the world’s largest producer of carbon emissions and if it doesn’t establish its carbon markets quickly it may lose the ability to control global pricing.