Tag Archives: chinese
Xinhua Insight: Carbon Emissions Trading Gains Momentum In China, Despite Challenges
Xinhua Insight: Carbon emissions trading gains momentum in China, despite challenges by Xinhua Writers Wang Wen and Yan Qilei GUIYANG, July 21 (Xinhua) – Chinese government officials, environment and energy experts, and entrepreneurs have vowed to join hands in accelerating the process of building a nationwide carbon emissions trading market. “The country will soon carry out scientific methods to record enterprises’ carbon emissions in major industries and find ways to allocate emissions quota appropriately, as preparations for a nationwide carbon emissions trading market,” said Su Wei, director of the climate change department of the National Development and Reform Commission. Su said at an ongoing international environmental protection forum held in Guiyang, capital of southwest China’s Guizhou Province, that as pilot carbon emissions trading schemes will be launched successively in seven provinces and cities in 2013 and 2014, the country is gaining momentum in curbing greenhouse gas emissions with a market mechanism. Experts and industry leaders, on the other hand, have warned of potential difficulties in terms of the legislature, carbon financing, statistics gathering and quota allocation, monitoring and assessment systems — all of which are key to building a mature market. “Carbon emissions trading will remain a fake market until these problems are solved,” said Xiong Yan, head of the Chinese state-owned Property Exchanges Association. PILOT SCHEME PROGRESS One month prior to the forum, China launched its first regional market for compulsory carbon trading in the southern city of Shenzhen after more than two years of preparations. The scheme covers 635 industrial companies and some public buildings that account for about 40 percent of the city’s carbon emissions. The carbon intensity, or the amount of carbon produced per unit of gross domestic product, of the 635 industrial companies in 2015 will drop 32 percent from the levels in 2010. Under the trading program, those that emit below their quotas could sell their excess limits to other emitters and even investors for profit. Eight deals, or 21,112-tonne carbon quotas, were traded on the first day at prices ranging from 28 to 32 yuan (about 4.6 to 5.2 U.S. dollars) per tonne. Following Shenzhen, six other areas — Beijing, Tianjin, Shanghai, Chongqing, Hubei and Guangdong — will launch the scheme soon. “These areas were carefully chosen, because they vary in levels of economic development, industrial structure as well as residents’ environmental protection awareness,” said Su, who added that the experience gained can be applied to the whole country. “Shenzhen, which is already a harbor for high-tech and environmentally-friendly enterprises, will further raise the market entry threshold and reject energy-consuming and high-polluting companies. But for the less-developed western city of Chongqing, the government has to persuade heavy industries to balance profit growth and environmental protection,” said Su. Qi Shaozhou, a professor at Wuhan Univerisity, said the emissions trading scheme in Hubei will set an example for parts of central and western of China on how to lift people out of poverty while still curbing pollution. It will also help the regional government, local enterprises and environmental protection organizations come to a consensus on eco-development plans. Experts on the forum also applauded how the public has changed its concept of carbon trading. “Five years ago when the China-Beijing Environmental Exchange was launched, officials would prevaricate, and enterprises and the general public said they did not understand the reason why such an exchange should be established,” said Xiong Yan. “But things are totally different now.” Chery Auto has invested 20 million yuan in the water supply network and rainwater collection system in its plant in Guiyang, reducing sewage disposal, said a manager surnamed Wang at Chery’s subsidy in Guiyang. She said more companies in western regions, including those in the steel, cement and chemical industries, value corporate social responsibility greatly and are willing to participate in carbon emissions trading. CHALLENGES FOR NATIONWIDE MARKET While they hailed the pilot schemes as a landmark step for China in building a nationwide market, experts said fundamental problems should be resolved before a market mechanism for curbing greenhouse gas emissions can be called a success in the country. “We want a law on carbon emissions trading and low-carbon development as soon as possible,” said Li Junfeng, head of China’s National Climate Change Strategy Research and International Cooperation Center. He said administrative means have limited influence in raising people’s awareness. With a legal bounding, companies will learn their rights and duties more clearly. “A law on climate change will enable government departments and public sectors to have a clear-cut division of work on the issue,” said Wang Yi, deputy director-general of the Institute of Policy and Management with the Chinese Academy of Sciences. Apart from legislature, Wang and his fellow experts appealed for the government to determine China’s total allowed carbon emissions. The country has pledged to reduce carbon dioxide emissions by 40 to 45 percent per unit of GDP by 2020, compared with the levels in 2005. “Without setting a figure for the intensity cut, or a date by which China’s total emissions would start falling, we cannot allocate quotas scientifically,” said Wang, who added that only when carbon emissions quotas become a scarce resource will companies be willing to trade for it. However, Wang also admitted that setting a figure for a developing country that still relies heavily on energy-consuming, high-polluting industries for economic development and poverty relief, determining a figure is not as easy as it seems. Pilot carbon emissions markets currently allocate quotas to enterprises according to their historical carbon emissions. “How to monitor companies’ carbon emissions and which organization can we appeal to when we are unfairly treated in emissions trading or quota transfers, are all to be decided,” said Huang Yaping, vice board chairman of Huaneng Coking Gas Co., Ltd. “It seems unfair that companies that emitted less pollution historically could receive stricter requirements. But we have to consider whether those that polluted more can afford substantial emissions reductions in a short period of time,” said Su, adding that reducing emissions is a long-term task for these enterprises. How to introduce carbon finance, or the creation of financial instruments that are tradable on the carbon market, is another important issue, said Li Junfeng. He said the government should be cautious not to let speculative investment result in negative price spikes while still introducing financial instruments to the market. Continue reading
Shanghai To Fine Firms For Breaching CO2 Market Rules
15 Jul 2013 10:13 Last updated: 15 Jul 2013 13:37 BEIJING, July 15 (Reuters Point Carbon) – Shanghai companies that fail to surrender enough government-issued carbon permits for each tonne of CO2 they emit under the city’s Emissions Trading Scheme face government fines of up to 100,000 RMB ($16,000) and will be forced to buy permits in the market, according to draft rules released by city lawmakers. Shanghai plans to launch an emissions market before the end of the year, capping carbon dioxide emissions from 200 companies across a broad sector of the city’s economy, including big energy users such as Bao Steel, energy companies such as PetroChina as well as China Eastern Airlines. The city is one of seven designated regions in which the central government is trialing emission markets before rolling out a federal scheme later in the decade in a bid to rein in pollution and greenhouse gas emissions and improve energy efficiency. The release of draft rules on Friday reveal for the first time how lawmakers intend to enforce environmental laws on companies responsible for pumping out about 110 million tonnes of carbon dioxide each year. “It is urgent to make clear rules on the basic issues as for carbon trading…. (the rules) will provide strong legal support and protection to carry out the pilot ETS,” the draft rules said. As well as fines for companies failing to surrender permits, companies that obstruct independent auditors in reporting emissions face penalties of up to RMB50,000 per breach. Emitters will be able to reduce the cost of complying with the scheme by offsetting up to 5 percent of their emissions by buying carbon credits, known as Chinese Certified Emission Reductions, from domestic projects that cut emissions. The rules, which were published on the local government’s website on Friday, still need to be ratified by government officials before becoming law. China, the world’s biggest emitter has been plagued by environmental problems associated with its rapid increase in coal consumption, with smog engulfing many of its cities located across the eastern seaboard. To improve energy efficiency the nation has a target to cut the emissions intensity of its economy – emissions per unit of GDP – by up to 45 percent by the end of the decade. To help it meet that goal, Shanghai plans to cut its carbon intensity by 19 percent below 2010 levels by 2015 and wants to curb 2013 energy consumption below 118.4 million tonnes of standard coal equivalent, increasing by 4.18 percent year-on-year. The city of Shenzhen was the first region in China to launch a carbon market in July, with permits changing hands at about $4.50-5.00 each, roughly the same price as those in Europe. By Kathy Chen – kathy.chen@thomsonreuters.com and Andrew Allan Continue reading
China’s Carbon Emissions Traders Await Offset Demand
Author: Daphne Yin As China rolls out seven domestic pilot emissions trading schemes this year – with the city of Shenzhen’s debuting last month – market actors are wondering how carbon offsets will fit into the picture. Here, we provide a breakdown of the types of offsets eligible for trading, existing supply and potential demand, as well as what’s on the horizon. 9 July 2013 | Designated as China’s first special economic zone back in 1980, the fast-growing city of Shenzhen has come to epitomize the country’s move toward market-oriented economic policies. On June 18, Shenzhen set yet another precedent when it launched the first of seven pilot programs to help pave the way for a national cap-and-trade program. Under the pilot program, 635 companies in Shenzhen, responsible for about 38% of the city’s emissions, face obligations to reduce their carbon intensity by 6.68% on average per year by 2015. The first day of trading on the Shenzhen Emissions Rights Exchange saw eight transactions of emissions allowances completed for a total of 21,112 tCO2e. Allowance prices ranged from 28 to 32 yuan per tonne, close to the expected price of 30 yuan per tonne (US$4.89). While only allowances have been traded so far, emitters have the option of trading carbon offsets in the form of Chinese Certified Emission Reductions (CCERs), which are issued by the National Development and Reform Commission (NDRC). The NDRC allows existing projects registered with the UN’s Clean Development Mechanism (CDM) to register as CCER projects – a source of potential relief for CDM suppliers reeling from the protracted collapse in prices for CDM project offsets (CERs) and the recent ban on CERs from non-least developed countries for use in the European Union Emissions Trading Scheme (EU ETS). Beyond the historically strong relationship between suppliers of Chinese renewable energy offsets and European buyers, there is potential for CERs from China-based projects to fetch higher prices from domestic buyers should the pilots manage their prices well. With more than 70% of the world’s CERs issued in China as of the end of 2012, a big question on the minds of Chinese CER suppliers is how much domestic demand they can actually expect to absorb existing and new offset supply. Ramping up Initial reactions to China’s new pilot activities have generally been positive among stakeholders, but elements of the system remain hazy. Liable emitters are expected to not only monitor, report, and verify their emissions, but also to participate in auctions. For the bulk of Chinese companies, trading offsets – or allowances for that matter – is an unfamiliar arena. “Even the few Chinese companies that are in a joint venture with a European or international company that has experience in the EU ETS or California’s market are just now getting organized,” notes Jeff Swartz, Director of International Policy at the International Emissions Trading Association (IETA), which oversees a working group in China to build capacity for the new pilots. “Policymakers haven’t actually traded allowances or purchased offsets, so there’s an imperative need to share information and work with companies in existing systems that have.” What’s eligible? In March, the NDRC released its first batch of 52 CCER methodologies eligible for domestic emissions trading, all of which are adapted from existing CDM methodologies. The list stays true to China’s traditional focus on renewable energy, energy efficiency and fuel switch, and methane. It also controversially includes methodologies for HFC-23 and N2O industrial gas offsets, which the EU ETS banned post-2012 in response to critique regarding their environmental integrity. Some say it is important for industrial gas suppliers to be able to access the domestic market – now their only major prospective source of demand – for recourse, however, a recent analysis by Climate Bridge – a major China-based project developer and retailer – expresses concern that the inclusion of industrial gas projects could crowd out China’s domestic offset market and potentially subject pilot schemes to low carbon prices as experienced in the EU ETS. Offsets from non- or pre-CDM projects are eligible for voluntary emissions trading if they apply methodologies that have been approved by the NDRC, according to interim government regulations . While not explicitly stated, this could potentially provide a bridge for projects developed to the Verified Carbon Standard (VCS) and Gold Standard, which certify many of their projects according to CDM methodologies. NDRC-approved methodologies do not yet cover forestry and land use, which the NDRC said it is still vetting alongside other CDM methodologies. Domestic initiatives like the Panda Standard , China’s first voluntary carbon standard developed by the China Beijing Environment Exchange and BlueNext with the support of Winrock International, are in the process of seeking approval from the NDRC for afforestation/reforestation methodologies. Gauging demand Domestic demand for offsets will inevitably vary between Shenzhen and other emerging pilots. After factoring in the level of emission reduction targets and allowances provided through the system (totaling 100 MtCO2e between 2013-2015), the scope of supply and demand for offsets will depend on the existing supply of offsets eligible for use under each pilot, as well as limits set on the use of offsets against emitters’ compliance obligations (tentatively 10% on average across China’s various planned pilots). “Policymakers are very aware of the fact that if they open up a fire hydrant, they could have a situation in which supply exceeds demand,” says Swartz. “However, I suspect they face a difficult situation in restricting offsets because some of the companies that they’re asking to participate in the ETS from the compliance point of view have also supplied CDM offsets in the past.” Given China’s large existing offset supply in certain areas, many project developers have been slow to embark on new projects until sufficient demand can soak up existing inventories. Climate Bridge’s analysis predicts that Shenzhen will have limited potential for new offset project development, as “the existing CER supply in this region already makes up more than 8% of the capped emissions.” The company expects other pilot jurisdictions like Tianjin, on the other hand, to have strong demand for new CCERs given the dearth of existing CDM projects in the area. Greater demand (and clarity) ahead? Over the course of this year, other pilots are busy incubating in the cities of Beijing, Tianjin, Shanghai, Chongqing, and the provinces of Hubei and Guangdong – each setting their own limits on offset location and project type. The plan is to eventually link the schemes together as a foundation for a national cap-and-trade program as early as 2016, following the release of China’s next Five-Year Plan. Should China’s carbon market eventually link with other markets abroad, China would be a net exporter of offsets, at least for the foreseeable future . The probability of cross-border linkages is still pretty slim at this point according to Wenjie Zhuang, Senior Project Manager at Climate Bridge. “China’s carbon market is in early stages – there is no national-level program yet,” she says. “And while the design of China’s pilot schemes has drawn lessons from trading systems all over the world, they also show many innovations in design.” Continue reading
