China's first carbon exchange opens
The mainland launched its first pilot carbon emissions exchange in Shenzhen yesterday, although plans for a nationwide roll-out and efforts to apply the scheme to polluting heavy industries have suffered in a slowing economy.
High-emission sectors such as steel and aluminium are expected to resist higher costs, as they are already fighting weak prices caused by tepid demand and oversupply.
Shawn He, a lawyer and carbon specialist at the Hualian legal practice in Beijing, said: "It is a very big concern for Beijing and for local governments - how to strike a balance between controlling emissions and maintaining economic growth, especially amid a general slowdown in the economy."
Under the cap-and-trade scheme, companies must buy allowances from others if they want to exceed carbon limits.
The Shenzhen exchange is one of seven pilot schemes due to be launched this year or next, and will involve 635 industrial firms, accounting for more than 25 per cent of local gross domestic product and more than 30 million tonnes of carbon-dioxide emissions. That compares to the mainland's total emissions of about eight billion tonnes last year.
While giant oil firms such as CNOOC and PetroChina will take part in the Shenzhen scheme, few of the companies involved will be from carbon-intensive heavy industrial sectors such as steel and aluminium.
Other platforms will be launched in Tianjin, Beijing, Shanghai, Chongqing, and Guangdong and Hubei provinces.
David Tang Yue-tan, the secretary of the board of the Tianjin Climate Exchange, told a conference last week: "The fact that Shenzhen [is going online] puts a lot of pressure on us. We are envious of them, but in a qualified way.
"The success of the pilots depends not on the first set of trade, but the 10th, the 100th … that tells you the market is really running."
However, Tang said that even if a carbon market was not active in trading in the early stages, their mere existence would get industrial polluters used to the idea that there would be caps and allowances trading down the road.
The Tianjin Climate Exchange aims to go live before the end of the year, but a national exchange was not expected until after 2015, Tang said.