Tag Archives: chinese
Explainer: China Carbon Trading Schemes Kick Off
By Erwin Jackson on 18 June 2013 The first of the seven planned Chinese pilot emission trading schemes, in Shenzhen, is to be launched today. While China has been indirectly pricing carbon for years, this scheme will be its first mandatory carbon market. Second largest emissions trading scheme in the world Pilot emission trading schemes are planned to start this year in Beijing, Chongqing, Guangdong, Hubei, Shanghai, Shenzhen and Tianjin. These pilots are expected to cover around 700 million tonnes of CO2-e by 2014, which is a fraction of China’s total emissions, yet are still very significant. By comparison, Australia’s carbon price covers around 380 million tonnes, California’s 165 million tonnes and Europe’s 2.1 billion tonnes. (See Table 2 for comparison with Australia.) China plans to implement a national scheme around 2016 based on the lessons learned from the pilot schemes. China is implementing a range of policies to address climate change, energy security and air pollution. If projections are accurate, these policies (see list of efforts on page 2) since 2005 will deliver a reduction in emissions of 4.5 billion tonnes of CO2 in 2020. This would be the largest single absolute reduction for any country in the history of action on climate change, and would equivalent of closing 1,000 500MW coal-fired power stations for a year. Note also that China’s unabated appetite for coal is overstated. China has been the world’s largest investor in coal over the last decade but the nation’s energy use is undergoing significant change. In 2011 coal plant investment was less than half of what it was in 2005. Inefficient coal generation have been progressive closed and last year coal consumption grew only 2.5 per cent compared to nearly 12 per cent in 2011. Renewable energy accounted for over 19 per cent of generation in 2012 and combined with nuclear, accounted for over 90 per cent of all electricity generation growth last year. Spotlight on Shenzhen Shenzhen is one of the China’s Special Economic Zones, located next to Hong Kong. It is home to around 11 million permanent residents. The region is seeking too to build an advanced carbon finance centre. In 2011, its GDP was around $178 billion and per capita incomes were around $17,000. Total emissions are estimated to be around 83 million tonnes in 2010 (compared to around 570 million in Australia). Rules will differ between the pilot schemes to allow China to experiment with different emission trading scheme designs (see table 1). Shenzhen has committed to reduce the emissions intensity of its economy by 21 per cent below 2010 levels by 2015. Like the schemes in other major economics, Shenzhen’s market has an absolute emission limit. This is around 32 million tonnes. This distinguishes it and other schemes from New Zealand’s emission market or the Coalition’s Emission Reduction Fund, which do not have a regulated cap on emissions. The scheme will cover all companies with emissions over 20,000 tonnes of CO2-e and around 40 per cent of total emissions. It covers 26 sectors, including electricity and natural gas, water supply and industrial manufacturing. Initially emission permits will be allocated to companies for free but this will be progressively reduced through time and income from the carbon price to be used to support the development of new carbon reduction technologies and projects. Companies that pollute more than they are allowed will have to buy credits from those that reduce emissions below their targets. Companies will be charged three times the market price for each tonne of CO2 they emit over their cap if they fail to deliver enough credits. It is unclear at this point whether carbon prices for traded units will be public in the short-term. Reasons for action Chinese officials have cited numerous reasons for their climate action, including an effort to build energy security, reduce air pollution, foster new industries and contribute to global emission reductions. China’s significant investment in clean energy, for instance, has helped the emerging economy leapt ahead of countries like the United States in its ranking among the G20 nations in its ability to compete in a global low carbon economy. This year China ranked 3rd, up from 7th last year. If China had not increased its clean energy investments, it would be in 8th place. Renewable energy in particular has had exponential growth. From having virtually no industry in 2005, China now has the largest installed capacity of wind power in the world and is the world’s largest producer of solar modules. China is now the world’s largest investor in renewable energy with around $65 billion invested in 2012. Between 2009 and 2011, China invested more money in renewable energy than it did in coal fired generation. Is it enough? Despite China’s recent efforts under current energy projections, emissions and coal use will keep growing until at least 2020. This is not inconsistent with a world seeking to avoid a 2°C increase in global temperature as long as an emissions peak by around this time. Erwin Jackson is Deputy CEO of The Climate Institute Continue reading
Can China Achieve Success With Carbon Trading Scheme?
By Puneet Pal Singh Business Reporter, BBC News China’s rapid industrialization has contributed to the rising pollution levels in the country Over the past few years China has earned itself quite a few crowns in the “world’s-biggest” category. It has become the world’s biggest internet market, largest car market, biggest exporter… the list goes on and on. While Beijing takes a lot of pride in some of these achievements, there is one title that it wants to let go of sooner rather than later, that of being the world’s biggest polluter. And in an attempt to do so, China has launched a pilot project of its first ever carbon trading scheme in Shenzhen. “This is definitely a big game-changer for China,” says Winnie Tang, a director with Kind Resources, an investment and deal advisory firm which focuses on carbon emission reduction. “It is a clear indication that they are serious about reducing emissions and bringing down pollution levels.” ‘Market-based policy’ Under carbon trading, firms are given credits – each equal to one tonne of carbon emissions. There is a cap on the credits issued to ensure that firms keep their emissions under control. “It is still a very new concept to the Chinese firms. They have little experience in recording their emissions and trading carbon credits” The companies are required to measure and report their carbon emissions and to hand in one allowance for each tonne of carbon they release. If companies emit less carbon than their allowance, they can trade their credits. On the other hand, if their emission levels exceed the limit, they have to buy fresh credits – thus putting a price on pollution. “It is a market-based policy. If someone emits more – they have to pay for it,” says Princeton Peng, chief executive of Climate Bridge, a firm specialising in carbon trading and offset project development. Mr Peng says this is likely to force companies to implement policies aimed at bringing down their emission levels and as a result help reduce overall pollution. China’s carbon trading scheme pilot projects Location Companies trading emissions Emissions covered SOURCE:CARBON MARKET WATCH Beijing 420 – 600 50% Shanghai 197 50% Tianjin 120 60% Chongqing NA NA Shenzhen 635 40% Guangdong 830 42% – 50% Hubei NA 35% European lesson? However, there are also concerns in China about what will happen to the price of credits when companies start to trade them. Some say that the price of these credits will rise as China looks to cut pollution levels, which may spark speculative trades. An excessive movement in the pricing of credits, on either side, could be detrimental to the overall objective of the scheme. “If the price goes too high, it will severely impact the operations of the companies,” says Mr Peng of Climate Bridge. Carbon emissions in China – key milestones 2006: Preliminary plan for nationwide emission trading scheme outlined 2008: Environment and energy exchanges established in Beijing, Shanghai and Tianjin 2010: 12th five-year plan lists carbon markets as key measure for reducing carbon and energy intensities 2011: Seven carbon trading pilots announced 2013: Shenzhen pilot starts Source: Climate Bridge “On the other hand, if the market price is too low – there is no incentive for people to reduce emission and invest in clean energy solutions.” These concerns stem in part from the developments in the European Union’s carbon trading market – currently the world’s biggest. The European Union (EU) market has seen the price of credits falling to $4 per tonne in recent weeks, from $40 per tonne a few years ago. Analysts blame the sharp decline on two key issues. They say that the rise in prices after the launch of the scheme in 2008 was triggered in part by traders who speculated that the carbon prices would keep rising. At the same time, they argue that authorities issued excessive amounts of credits which narrowed the demand-and-supply gap. That coupled with an overall slowdown in the EU economy resulted in the price of the credits falling and raised concerns about the future of the scheme. However, analysts say that Beijing has had the opportunity to learn from the developments in the EU and has fine-tuned its scheme. “No one really knows what is going to happen with the China market, but they have done their research on what the EU got wrong and are less likely to make those mistakes,” says Ms Tang. ‘Learning process’ The pilot in Shenzen is the first of seven such projects that will be launched in China over the next few months. Beijing plans to eventually launch a nationwide carbon trading scheme by 2015-16. Analysts say that by piloting the scheme across different areas, China is looking to ensure that it can tackle any teething issues and iron them out before the country-wide launch. “This will be a learning process both for the government and companies,” says Yue-tan David Tang, secretary of the board of Tianjin Climate Exchange. “The companies will have to learn how to take part in the emissions market. “The government will have the time and the opportunity to improve upon emission data infrastructure – which includes the quality of data collected and how it is collected,” he explains. Mr Tang adds that there is political will in China to get the scheme rolling and the success of the pilot programmes will only strengthen that commitment. When launched nationwide, the scheme is likely see China emerge as the world’s biggest carbon trading market. And if that helps to bring down pollution levels substantially, it will be one crown that Beijing will wear with pride. Continue reading
Carbon Trading with Chinese Characteristics
To control greenhouse gases the Chinese government is experimenting with pilot programs in seven cities and regions that use markets By Mark Nicholls NEW CITY: On June 18, companies in Shenzhen will have to meet greenhouse gas emission targets as part of a new cap and trade market experiment. Showcasing more than fifty of the most provocative, original, and significant online essays from 2011, The Best Science Writing Online 2012 will change the way… On June 18 China’s pioneering city of Shenzhen is set to notch up another first. From that day 635 companies in the Shenzhen Special Economic Zone—which in 1979 became the vanguard for China’s capitalist revolution—will start using the markets to help meet greenhouse gas emissions targets . This year, alongside the cities of Beijing, Shanghai, Tianjin and Chongqing as well as the regions of Guangdong and Hubei, Shenzhen is imposing greenhouse gas targets on hundreds of companies, ranging from power plants to airport operators. The goal is to develop a national carbon market over the next decade that could help put the brakes on the world’s largest carbon dioxide emitter. “China has internationally pledged 2020 climate targets,” observes Chai Hongliang, an analyst at Thomson Reuters Point Carbon, an Oslo-based information-provider specializing in carbon markets. He is referring to a commitment first made by China ahead of the 2009 Copenhagen climate talks to reduce its economy’s overall carbon emissions per unit of GDP to 40 to 45 percent below 2005 levels by 2020. “It has two ways to reach the target: shut down factories in the last months of 2020 or use more market-based approaches like emissions trading,” Chai adds. As with emission-trading programs elsewhere, polluters in China’s pilots have two options: First, they can meet their targets by reducing their own emissions—by investing in energy efficiency, say, or curbing production. Alternatively, they can buy carbon allowances or credits from companies that have spare allowances or from projects elsewhere in China. Shenzhen faces the toughest target. The companies in its pilot emitted the equivalent of 31 million metric tons (Mt) of CO2 in 2010. They will be allocated around 100 Mt of allowances for the duration of the three-year trial, although expected economic growth means they will have to reduce their carbon intensity by an estimated 30 percent by 2015 compared with 2010. Balancing the need for economic growth with carbon control is a challenge. Emissions in China are expected to rise for years, given the importance China’s political elite continue to place on economic growth. Some observers question how much pressure China’s planners are prepared to put on its big emitters. The pilots set emission limits from January 2013 through the end of 2015. “I think the emissions caps will be relatively lenient,” Chai says. Certainly the regulators will be eager to avoid any “carbon leakage”—that is, driving industry out of their jurisdictions through imposing too stringent targets ahead of any national program. But at this point Chai can only speculate about their stringency. Limited information is available about participating companies, their historical emissions—and even the rules under which the pilots will operate. And part of the reason is that some of these data do not exist. The problem with data To run effectively markets rely on an unimpeded flow of information, clear rules and rigorous oversight. China could both benefit from the lessons of earlier efforts, such as Europe’s flagship carbon market—the world’s largest, known as the European Union Emissions Trading System, or ETS. It is under fire from some environmentalists because of its relatively lax targets and low carbon prices, along with its vulnerability to fraud and abuse. For the regulators drawing up targets, “there are existing processes and mechanisms on energy consumption which could be drawn on, as well as local exercises in creating GHG [greenhouse gas] inventories,” says Lina Li, a Beijing-based carbon markets expert at Netherlands-based consultancy Ecofys. Her firm has advised local regulators and international donors on creating carbon market regulations and infrastructure in China. “But there are still challenges regarding emissions data at the company level.” This is exactly where the E.U. was in 2005, when it embarked on the pilot phase of its ETS—and the lack of emissions data allowed companies to game the system. E.U. governments asked companies to provide their own, unverified historical emissions data, and many inflated their numbers so as to claim more free allowances from government. This practice created an overhang of surplus permits that led to a price collapse in 2007. Generous allocations of allowances are probably inevitable as the price paid for industry acceptance, however, suggests Karl Upston-Hooper, legal counsel of GreenStream Network, a Finnish carbon asset manager that is active in China. “You will struggle to find an ETS that is not overallocated” in its early phases, he says. Indeed, he argues that the pilots in China are less about creating carbon markets and more about gathering data. “I’ve taken the view that they’re implementing an emissions-monitoring system, not a carbon market—and I’m okay with that as a first step on the road.” Most observers—including from the environmental movement—are prepared to give China’s regulators time to get things right. “It is our view that the first step for Chinese ETS is to get the system right from the beginning—the trading platform; the monitoring, reporting and verification system; [emissions] inventories; getting companies informed and cooperative—and gradually shift toward more stringent caps,” says Li Shuo, a climate and energy campaigner for Greenpeace East Asia. Plenty of studies see China’s emissions peaking by 2030. Some are more optimistic: recent ones predict 2025 to 2030. A further data challenge is whether China’s regulators will be sufficiently transparent and even-handed when it comes to the country’s carbon markets. “In Europe and elsewhere, ETS data are under public scrutiny. That may not be the case in China,” says Point Carbon’s Chai. Another concern is insufficient coordination among the seven pilots, Li says. Indeed, rivalry exists among the various authorities, with Beijing deliberately encouraging a degree of “policy competition” to test differing approaches to see which works best. Last, despite a recent announcement by the powerful National Development and Reform and Commission (NDRC) that it is to propose a national carbon cap for China’s next five-year plan, which runs from 2016 to 2020, a national Chinese carbon market is not assured. Other methods could prove more effective. “In China the ETS is not the only tool,” says Wu Changhua, Beijing-based Greater China director of the nonprofit Climate Group. She notes that the nation’s finance ministry is promoting a carbon tax whereas other government ministries are considering a system for crediting and trading energy-efficiency improvements. Wu also cautions that international media speculation around the introduction of a national carbon cap by 2016 is overblown. She argues that the NDRC is agitating for the inclusion of the concept in the next plan to ensure resources are available for more research and policy development. “One thing is for sure,” she adds. “The political leadership in China is much more serious, stronger and determined to tackle environmental problems. But it will be a journey. We’re not going to get there immediately.” Continue reading
