China plans to draw on the experience of seven regional carbon markets as it drafts new national legislation in one or two years, according to the country's senior climate negotiator.
The nation, the biggest emitter of greenhouse gases linked to global warming, will "actively promote" the legislation, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said in Beijing.
Shanghai and Shenzhen are trying to set rules for carbon trading, providing expertise for the nation, he said.
China, which surpassed Japan in 2010 to become the world's second-biggest economy, plans to cut carbon emissions per unit of economic output by 40 per cent to 45 per cent before 2020 and learn from carbon-pricing efforts in South Korea, Australia and the European Union, Xie said.
"The carbon price depends on emission-cutting efforts," he said. The EU price is "very low" probably because they allocated too many emission quotas when designing their market. "We are learning lessons."
The Shanghai carbon exchange plans to take back allowances when carbon prices are low and sell more when they are high "to maintain relatively stable levels", Xie said.
China's national climate legislation will have a binding effect, Charlie Cao, a Beijing-based analyst at Bloomberg New Energy Finance, said. "This will bring stable expectations to investors on a carbon market. Otherwise they don't have confidence."
Seven cities and provinces were asked last year to set regional caps and pilot programmes for trading emission rights. The country set targets to cut carbon intensity reduction and energy consumption by 2015 for each city and province, Xie said. The total amount of carbon emissions can be estimated with planned economic growth.
China will then set quotas for carbon emissions and allocate them into key enterprises. Shenzhen is scheduled to start emissions trading on June 18 and Shanghai is likely to follow this year.