Tag Archives: chinese
Future Points To Carbon Trading
China Daily, June 14, 2013 Smoke billows from a factory in Dezhou, Shandong province. To reach mandatory efficiency goals, the government had to take some extreme steps, including power cuts and limits on electricity supply in 2010. [China Daily] Chinese companies that have long faced relatively low environmental costs will have to figure out efficient ways to cut carbon dioxide emissions as a market mechanism is right around the corner. The country’s first pilot carbon-trading program for cutting greenhouse gas emissions will make its formal debut on Tuesday in Shenzhen, the southern city in Guangdong province that has long been a leader in China’s reforms. The Shenzhen pilot program is expected to hasten the launch of pilots in other regions. The central government has designated four other cities, including Beijing and Shanghai, and two provinces to roll out pilot carbon-trading programs by 2014. In Shenzhen, about 635 companies accounted for about 38 percent of the city’s total emissions, and they will be included in the experimental program. Using a 2012 baseline of carbon dioxide emissions of roughly 31.73 million tons, Shenzhen will issue 100 million tons of free emissions allowances to companies complying with the program between 2013 and 2015. Rather than copy cap-and-trade programs in Europe or California, the Shenzhen pilot sets limits on carbon intensity (carbon dioxide emissions per unit of GDP) for emitters. The 635 companies must achieve an average annual carbon intensity reduction of 6.68 percent by 2015. However, regions will explore various approaches in establishing their own experimental programs. Cities such as Beijing might adopt absolute emission caps, said industrial experts. Carbon intensity “Adopting a carbon intensity index is in line with China’s commitment of reducing carbon intensity,” said Yang Fuqiang, senior adviser on energy, environment and climate change for the Natural Resources Defense Council in Beijing. China has set a target of reducing carbon intensity by 40 to 45 percent by 2020, compared with the 2005 levels. Carbon intensity reduction leaves room for growth by allowing a limited increase of carbon emissions, said Yang. “All approaches could be used, but the final target is to have a nationwide market, and some kind of top-level programs should be put in place,” said Yang. Most international carbon markets adopt absolute caps, but it still remains uncertain when China will reach an absolute peak in emissions. Before the two-week climate change talks in Bonn in early June, the peak issue was already in the limelight. Some media reports said China’s greenhouse gas emissions might peak before 2025 and the country might introduce a cap in 2016. Reports about an early cap were dismissed by Su Wei, China’s chief climate negotiator in Bonn, while he reaffirmed China’s commitment to a carbon-intensity target by 2020. The peak issue is part of the agenda for China in its sustainable development, but when it will happen requires more in-depth analysis, said Zhou Dadi, vice-chairman of the National Energy Advisory Committee. Various studies have yielded wide variations for China’s carbon emissions peak, ranging from 2025 to 2040. “The year of 2025, or the period between 2025 and 2030, each has a high probability, but a precondition is China’s energy demand for industrialization, which could peak by 2020, and the country could then enter a post-industrial era,” said Yang. Another key factor is the speed of China’s urbanization. The quicker the process is, the earlier the country’s emissions peak will come, Yang said. Many Shenzhen businesses are willing to experiment with the new mechanism since it could also generate new business opportunities, though some power plants may be reluctant to adopt the new system, said experts who were involved in the design of the program. The cost of environmental degradation has been largely ignored during China’s impressive economic development in recent decades, putting mounting pressure on the government. Environmental costs To reach China’s mandatory efficiency goals, the government had to take some extreme steps, including power cuts and limits on electricity supply in 2010. “A market-based mechanism will surely work better than administrative measures. Companies should internalize environmental costs that were previously taken by the government,” said Tang Renhu, general manager of Beijing-based Sino-Carbon Innovation and Investment Co. To avoid a low price in carbon auctions, regulators in some markets may set a floor price. Prices that are too low reduce companies’ incentive to invest in technology to cut down emissions. But according to experts, the Shenzhen pilot program has yet to set either a floor or a ceiling on carbon prices for auction. For energy-conservation projects, the central government offers a subsidy of 240 yuan ($39) for each ton of coal equivalent saved, while provincial-level governments offer about 60 yuan. Based on that, the reference carbon price is about 100 yuan per ton, said Tang. This number “could be a reference to the market, but the price needs to be decided by the market,” he said. California established its carbon market last November with quarterly auctions of carbon allowances, making it the second-largest carbon market in the world after the EU’s Emission Trading Scheme or ETS. California set a $10 price floor for its first allowance auction in November. The carbon allowances were actually sold at $10.09 a ton. In its second auction in February, the price rose to $13.62 a ton, and the price then hit a record of $14 in the third auction in May. Gary Gero, president of the California-based Climate Action Reserve, said the most affected companies are electric utilities, petroleum refineries and large manufacturing facilities. Most companies will assess the costs of implementing on-site emission reductions relative to the cost of an allowance or offset and then pursue the most cost-effective reduction opportunities. “This is the very point of a cap-and-trade program; it provides the largest amount of emission reductions at the least possible cost, thereby reducing the economic impact on businesses and consumers,” said Gero. This program will result in the shifting of energy production to cleaner fuels and technologies as the program progresses and after the least expensive reductions have been identified and implemented, he added. The problems of the EU’s ETS, the largest player in the global carbon market, are mostly due to two related issues: the excessive allocation of permits and carbon price volatility. Justin Dargin, energy and carbon markets expert at the University of Oxford, said China should not be overly concerned about the success or failure of carbon markets outside its jurisdiction. The reason that China is concerned about the development of carbon markets has mostly to do with transitioning its economy away from an energy-intensive model. The introduction of energy-efficient industrial equipment would also lower China’s aggregate energy consumption. That would help China meet its energy security goals for the medium and longer term. These goals are relatively independent of developments outside of China, said Dargin. Yet, China can learn from other jurisdictions and therefore should pay close attention to the best practices and “lessons learned” elsewhere. Dargin suggested setting a carbon price floor that is high enough to create incentives for industry to invest in clean technology, while at the same time not being too high to hinder industrial competitiveness. The price band should also attempt to minimize volatility as much as possible. Xie Zhenhua, China’s top climate change official, said in April that China will draw lessons from the EU’s ETS, the world’s biggest emissions trading system, which has had a lingering oversupply of carbon allowances and low prices. Challenges ahead Setting standards and building the capacity of China’s carbon market takes time, but the biggest hurdle might be China’s sluggish energy pricing system reform. Whether electricity rates are determined by the market will be a core concern of building a carbon market, said Dargin. “Without a market-determined price, the imposition of a carbon price on power producers would have little impact as power producers are not allowed to pass on costs to end-users and resist absorbing these costs themselves,” he said. Carbon is a product that is closely linked to energy, but China’s energy prices are still mainly controlled by the government. But this year the government has showed signs of accelerating its energy price reforms. The National Development and Reform Commission in March launched a more market-oriented fuel pricing system to better reflect costs. Economists said relatively low inflation levels have provided favorable conditions for energy pricing reform. The healthy development of the carbon market will eventually rely on reform of the energy pricing system, said Tang. “It’s difficult to (do things that) affect vested interests among energy groups, so starting the carbon market could be a force to help accelerate reform in the energy sector, but that also brings major challenges for China’s carbon market,” said Tang. Also, integration among different markets will be a challenge, he said. Local pilot projects may have some limitations such as small trading pools for suppliers and buyers, so the central government should allow them to extend trading with other regions, said experts. Also, potential fraud must be monitored by regulators to ensure that the market has adequate oversight and transparency. As carbon exchanges open in various cities, information security must be monitored and made robust, said Dargin. For instance, regulators shut down the EU’s ETS after hackers stole more than 3 million carbon credits from government and private company accounts. Furthermore, penalties for non-compliance must be clear. What are the penalties if emitters exceed their emissions caps and do not pay the levied fines? This needs to be clearly stated, said Dargin. Continue reading
Silver Linings In The IEA Report On 2012 Fossil Fuel Carbon Emissions
Carbon emissions from fossil fuels reached record levels, but the 2012 rise was relatively small, and there are positive signs China’s energy mix is becoming less carbon intensive. Photograph: Bei Feng/EPA As Fiona Harvey reported for The Guardian, the International Energy Agency (IEA) 2012 World Energy Outlook Report found that annual carbon dioxide emissions from fossil fuels rose 1.4 percent in 2012 to 31.6 billion tonnes (gigatonnes [Gt]). The bad news is that this is a new record high level of emissions. The good news is that it represents the second-smallest annual increase since 2003, behind only 2009 when global fossil fuel carbon emissions fell due to the global recession. Emissions estimates from 2009–2010 have also been revised downward, so the reported 31.6 Gt 2012 emissions match the reported value from 2011 . American emissions of carbon dioxide from fossil fuels fell by 200 million tonnes (Mt) to levels last seen in the mid-1990s due to a transition from coal power to natural gas and renewable energy . European emissions fell 50 Mt due to economic contraction and renewable energy growth, despite an increase in coal energy use. Perhaps most encouraging, although Chinese emissions grew by 300 Mt in 2012, this was among the country’s smallest annual emissions growth over the past decade. This is a result of China diversifying its energy sources and installing more renewable energy. Chinese CO2 emissions per unit of electricity generation since 2000 The IEA report comes on the heels of an agreement between the presidents of USA and China to reduce emissions of hydrofluorocarbons (HFCs), which are potent greenhouse gases. This could potentially lead to the reduction the equivalent of 90 Gt of carbon dioxide by 2050, or nearly three years of current global emissions from fossil fuel use. China is also considering putting a price on its carbon emissions, and their goal is to end the rapid growth of Chinese coal power use . So there are signs that the world’s two largest greenhouse gas emitters, USA and China are beginning to take serious steps to address the climate problem. The question is whether those steps will be large enough and fast enough to avoid triggering dangerous climate change . At the moment, we our emissions are closest to Scenario A2 from the 2007 Intergovernmental Panel on Climate Change (IPCC) report. IEA emissions vs. IPCC scenarios Scenario A2 represents 3 to 4°C global surface warming by 2100 as compared to pre-industrial levels. This far exceeds the internationally accepted 2°C “danger limit” , and would put us at serious risk of catastrophic climate change . However, the relatively small emissions increase in 2012 has pushed us in the direction of IPCC scenario A1T, which represents 2 to 3°C warming by 2100. That still exceeds the danger limit, but at least it’s movement in the right direction. More still needs to be done to reduce our fossil fuel consumption. To have a realistic chance of avoiding 2°C warming, emissions need to peak by the year 2020. The earlier they peak, the better chance we have of limiting the impacts of climate change to an adaptable level. This will be challenging, because power plants have lifetimes of many decades, so we’re already “locked in” to a substantial chunk of emissions from those that have already been constructed or are in construction. The IEA report presented four recommendations for limiting global warming to 2°C: 1) Increase energy efficiency in buildings, transportation, and industry. 2) Limit the construction and use of inefficient coal power plants. 3) Minimize methane emissions from oil and gas production. 4) Accelerate the phase-out of fossil fuel subsidies . The positive movement from China and the USA in particular is encouraging, but we still have a lot of work ahead to turn the annual carbon emissions growth into an annual decline in order to limit the climate damage to adaptable levels. Continue reading
China Sticks to Carbon-Intensity Target, Dismisses CO2 Cap
By Alex Morales – Jun 4, 2013 China’s Chief Climate Negotiator Su Wei reaffirmed his nation’s commitment to lower emissions relative to economic output while dismissing reports that it will adopt an absolute cap on greenhouse gases . The Financial Times and Independent newspapers both said last month that China is looking to introduce a cap in 2016. The Independent cited a proposal by the National Development and Reform Commission, the economic planning agency where Su works. The FT cited Jiang Kejun, an NDRC carbon-policy researcher. “The paper quoted an expert,” Su said today in an interview in Bonn, where two weeks of climate talks began yesterday. “It’s not necessarily presenting the view of the government or the NDRC. The NDRC would reaffirm that we have committed to a carbon-intensity target by 2020.” Su’s comments are the first by a senior Chinese negotiator since the reports were published. While not an outright denial, they suggest China isn’t ready to announce a cap at the United Nations talks in Germany , where such a move may have spurred other nations to step up measures against global warming. “What I have seen so far is speculation in the press, but I haven’t seen China really coming out and saying it,” Artur Runge-Metzger, the European Commission’s lead envoy at the talks, said in an interview. “It could really unlock the negotiations and show leadership by China. It could be changing the game, depending on the content.” Largest Emitter Envoys are waiting for China to take leadership because it’s the biggest emitter, said Fuqiang Yang, senior adviser on energy, environment and climate change for the Washington-based Natural Resources Defense Council’s China program. “An absolute peaking of Chinese emissions is one scenario, and they’re looking at many possibilities,” Yang said in an interview in Bonn. “They’re not yet ready to pick one of the scenarios to announce internationally.” Envoys at the UN talks aim to craft a new climate treaty by 2015 that will take effect in 2020. They’re also discussing how to raise emission-reduction targets in the meantime, with the World Bank warning that global temperatures may increase by 4 degrees Celsius, double the internationally agreed goal. The average concentration of carbon dioxide in the atmosphere exceeded 400 parts per million last month for the first time at the Hawaiian monitoring station that first began tracking the gas in 1958. That threshold hasn’t been passed in millions of years, scientific studies show. Behind Schedule “Allowing the concentration to rise further would be suicidal,” Nepalese envoy Prakash Mathema told delegates today in Bonn. “We are behind schedule and time is not on our side.” The emphasis at previous UN talks has been for developed nations to take the lead by adopting absolute emission caps, with developing countries taking voluntary measures. The 2015 deal will mark the first time developing nations accept binding targets, and pressure has mounted on China to boost its efforts. China’s current goal is to reduce emissions per dollar of economic output by 40 percent to 45 percent in 2020, from 2005 levels. With a growing economy, that may still allow emissions to rise, whereas an absolute cap would set a carbon ceiling. “There are lots of ways we can achieve the carbon-intensity target by 2020,” Su said. “We would certainly make arrangements in both the 12th and 13th five-year plans to achieve that objective.” The 12th of China’s five-year plans, which chart economic priorities and targets, runs from 2011 through 2015, and the 13th runs through 2020. To contact the reporter on this story: Alex Morales in Bonn via amorales2@bloomberg.net . To contact the editor responsible for this story: Reed Landberg via landberg@bloomberg.net . Continue reading
