Two Jiangsu power plants have launched the mainland's first inter-city sulphur dioxide emissions trading scheme aimed at reducing pollution. The move is seen as a possible foundation for a nationwide programme to cut emissions of sulphur dioxide (SO2). The government selected Jiangsu to try out the first regional trading scheme because it has a provincial trading law and an efficient permit system. While Beijing rejects trading as a means of controlling carbon dioxide emissions on an international front, it is willing to use trading to control its domestic SO2 emissions. Xinhua reported on Wednesday that Taicang city's Gang Environmental Power Production Company will pay 1.7 million yuan (HK$1.5 million) to Nanjing city's Xiaguan Power Plant for the right to emit 1,700 extra tonnes of SO2 annually. The report said the Taicang company exceeded provincial SO2 emissions standards by more than 2,000 tonnes a year, while the Nanjing plant was 3,000 tonnes below its allowed quota. The trade comes after the two coal-fired power plants negotiated a price of one yuan per kilogram. The contract will be renegotiated in 2006. Experts say the transaction marks a major step in the nation's attempts to develop market incentives to control rising SO2 emissions. Zhang Jianyu, an emissions trading specialist with the non-governmental Environmental Defence Fund in Beijing, said the trial would serve as an example for the whole nation. 'This is a good illustration of how to broker an emissions trade within a province,' Mr Zhang said. The mainland is one of the world's largest producers of SO2, releasing about 19 million tonnes in 2000. The gas, which is produced by burning coal, causes acid rain that damages land, crops, buildings and is a serious threat to public health. As well as damaging eastern regions, the mainland's acid rain has also affected Japan and Korea. As part of its 2001-2005 five-year plan, the State Environmental Protection Administration ruled that the mainland's SO2 emissions must be reduced to 10 per cent of 2000 levels by 2005. Despite Beijing's mandates, SO2 emissions are rising. Experts have been calling for a nationwide emissions trading system since the early 1990s. City-wide SO2 emissions trading schemes have been set up in Liaoning province's Benxi city and Jiangsu's Nantong city in the past few years, leading to the inter-city scheme in Jiangsu.