A senior European Union climate official has urged China to roll out a nationwide carbon market before the planned completion date of 2020, insisting a carbon cap would not expose the country to greater international pressure to agree to a new climate treaty.
Jos Delbeke, director general of the European Commission's Climate Action initiative, said the wider the market scope, the more efficient the cap-and-trade system would be in reducing carbon emissions.
In an interview with the South China Morning Post last week, Delbeke said senior Chinese officials need not worry, adding that the EU's own emission trading scheme only covered a part of its total carbon emissions.
The EU has embarked on the €5 million (HK$53 million) initiative to help China widen its existing regional pilot carbon trading schemes.
"We hope China could roll out a national scheme before 2020 and as soon as possible," Delbeke said, "because a cap-and-trade system … can help spot the low-cost options [for carbon reduction] on the market."
He added the earlier a scheme was implemented the cheaper it would be "as it would prevent investment in the wrong type of technology".
China has launched six carbon markets over the past year, where local governments impose emissions caps on carbon-intensive companies through the issuing of carbon credits.
If a company's emissions go over the limit, they are required to buy more carbon credits to cover the excess discharge. At the same time, a company that becomes more energy-efficient and reduces its carbon footprint can sell carbon credits to help finance investment.
Senior officials have previously said a nationwide roll-out of the carbon market would take place in 2020, when a new global climate treaty is due to take effect as part of the United Nations framework to address climate change. China, as the world's biggest carbon emitter, is under pressure to take on an absolute cap.
Beijing bases its carbon intensity targets on emissions per unit of economic growth, a formula to reduce carbon intensity by 40-45 per cent by 2020 from 2005 levels, under an existing treaty which exempts developing countries from absolute reductions.
Establishing a nationwide carbon market would entail China setting a carbon cap so that the emission credits could be traded. Beijing has been cautious about such a move amid fears it could put China under greater pressure in climate talks, according to observers.
"Through a carbon market, China may discover that it is not that expensive to have a climate policy," said Delbeke.
Su Wei, director of the climate change department at the National Development and Reform Commission, the state economic planner, has said a focus of this year's work would be further testing of regional exchanges.
For instance, the exchanges in Beijing and Tianjin could cover Shanxi , Hebei and Inner Mongolia. Similarly, in the Yangtze and Pearl river deltas, regional markets could be based on existing exchanges in Shanghai, Shenzhen and Guangdong. Eventually, these regional markets could pave the way for a nationwide market, according to Su, though he gave no detailed timetable.
Delbeke said setting the carbon cap at the right level, and maintaining accurate carbon emission statistics, were two pillars for the success of carbon markets.
The pilot platforms are to be reviewed in 2015, and will help Beijing decide whether to set up a national exchange.