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China pollution

China launches world’s biggest carbon-trading scheme in fight against climate change

National plan boosts Beijing’s emerging leadership as the US – the world’s second-largest greenhouse gas emitter after China – retreats on its climate advocacy

PUBLISHED : Wednesday, 20 December, 2017, 11:29am
UPDATED : Wednesday, 20 December, 2017, 11:38am

China launched a nationwide carbon-trading scheme on Tuesday, solidifying its role as an emerging leader in the fight against climate change.

The market will initially cover about 1,700 coal- and natural gas-based power-generating companies, accounting for about 3 billion tonnes of carbon dioxide emissions per year – more than a third of the country’s total, China’s National Development and Reform Commission said.

“The power-generation industry is in the most favourable position [for the scheme] right now, with the most complete data and a relatively large scale of carbon emissions,” Zhang Yong, a vice-chairman at the commission, said.

The scheme would later be expanded to cover seven other sectors, including petrochemicals, chemicals, building materials, and iron and steel, he said.

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Even limited to the power sector, China’s national carbon market will be the world’s biggest – about 1.5 times as large as the second-biggest, the European Union, and several times bigger than California’s, which is the biggest in North America.

“This is an incredibly ambitious exercise,” Nathaniel Keohane, a vice-president at the Environmental Defense Fund, a New York-based charity that helped China devise the scheme, said. “It’s like the Pyramids of Giza.”

The scheme could enable China – the world’s biggest greenhouse gas emitter – to formulate even more ambitious climate goals in coming years, potentially reaching peak emissions before its stated target of 2030, he said.

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The government will spend a year building a nationwide registration system covering all companies taking part in the scheme, the state-run China Daily reported. It will spend another year testing the system, and actual transactions will begin in about three years.

“I don’t think we should be surprised that China is proceeding fairly thoroughly and methodically,” Keohane said. “I think that is a good thing – it means they’re intent on getting it right.”

An emissions trading scheme is, essentially, a market-based incentive system to reduce greenhouse gas emissions. It involves setting a limit on total carbon emissions, and then – within that limit – allowing polluting companies to buy “carbon credits” from their less-polluting counterparts, thereby imposing a financial burden on the polluters and granting rewards to cleaner entities.

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Proponents say the system is more efficient than strict, across-the-board emissions limits, and prevents companies from shunting the costs of environmental pollution to the public.

In 2015, Chinese President Xi Jinping promised to launch the scheme this year during a meeting with then US President Barack Obama in the run-up to the historic 2015 Paris climate accord. It will build on seven regional pilot programmes that were approved in 2011.

Experts say China is assuming climate leadership from the US, which has been retreating on its climate advocacy since President Donald Trump’s inauguration in January. Trump, who has repeatedly cast doubt on the existence of human-induced climate change, announced in June that the US would leave the Paris climate accord. On Monday, in a wide-ranging national security speech, he dropped climate change from a list of global threats.

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Several states, including California, have shunned Washington’s position on the issue. In June, California governor Jerry Brown travelled to China and signed a non-binding agreement with Beijing to limit greenhouse gases.

Although pollution remains a serious concern across China, the government’s anti-pollution efforts – and by extension, its climate mitigation efforts – are gaining strength.

Much of it traces back to Xi’s environmental record. “Clear waters and green mountains are as valuable as mountains of gold and silver,” Xi once said, and the expression has become standard in government propaganda and state media reports.

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In October, the Communist Party elevated Xi to become the country’s most powerful leader since Mao Zedong.

Beijing’s skies have been unseasonably blue this winter, due in part to favourable weather, but also because local officials in neighbouring provinces banned coal use, despite a lack of alternative energy sources. After natural gas prices spiked, and many people complained of going without heat in midwinter, officials partially rescinded the ban.