Nov 25, 2013 - 11:17am
This year China has ramped up its efforts to cut carbon and air pollution through carbon trading, renewable energy investment and caps on coal use. Various industry analysts predict that Chinese coal consumption could peak by 2020 and then decline.
Carbon markets in Shanghai and Beijing to launch in coming days.
It is expected that Shanghai will launch an emission trading scheme on 26 November, covering approximately 190 companies emitting 110-150 million tonnes of carbon dioxide (CO2). The Beijing market is set to begin on 28 November, and will cover more than 400 companies responsible for emissions from power, industry and large buildings.
China’s developing carbon markets
China is developing at least seven pilot emission trading schemes. China’s first ETS began in June, in the city of Shenzhen (pop. 7 million). The Shenzhen market covers over 800 private and public organisations responsible for 31 million tonnes of carbon pollution, or about 40 per cent of the city’s emissions.
Guangdong province (pop. 100+ million), which includes Shenzhen, is expected to launch a provincial carbon market by the end of the year. This will be the world’s second largest ETS. Covering 600-650 million tonnes of CO2 across the power, iron, steel, cement and petrochemical sectors, it will be nearly twice as large as Australia’s national carbon market and smaller only than the European Union ETS, which covers 2.1 billion tonnes of CO2. (California’s ETS is about half the size, at 165 million tonnes.)
The region of Hubei and the cities of Chongqing and Tianjin are also preparing emission schemes.
Each market has slightly different characteristics, enabling China to test the effectiveness of a range of approaches. In total, the seven pilot carbon markets will cover more than 700 million tonnes of carbon pollution by 2014. China plans to implement a national scheme around 2016 based on the lessons learned from the pilot schemes. It is also considering a carbon tax.
All the pilots are expected to have mandatory limits on pollution for covered sectors. This is similar to Australia’s current legislation, which from 2015 sets a cap on emissions, but differs from the Government’s proposed policy, which has no limit on carbon pollution.
Carbon prices in these markets will evolve through time and are difficult to project with confidence at this point. For example, since trading started in Shenzhen, prices there have ranged from below $A5 to more than $A21 per tonne.
Table 1: Parameters of six of China’s seven pilot emission trading schemes
Drivers for action: carbon, air pollution, energy security, industrial modernisation
China recognises the significant threat posed by climate change, and has committed to reducing its carbon emissions per unit of GDP by 40-45 per cent by 2020. Provinces have their own emissions goals: for example Guangdong is required to improve its carbon intensity by 19.5 per cent compared with 2010 levels, by 2015.China is also focused on increasing its energy efficiency. Inefficient industrial and power generation capacity is being closed, while the country’s top 10,000 energy intensive firms are required to meet energy saving targets or face a range of penalties.
As well as emissions reduction, China’s efforts to boost its carbon productivity are driven by other imperatives: the need to modernise its industrial sector, improve its energy security and tackle air pollution and water scarcity.
Table 2: China’s policy developments in 2013
China is far from the only emerging economy making significant progress this year.
For more information
India. In March India announced its aim to nearly double wind power in five years by installing 15 gigawatts of new power capacity by 2017.
Kazakhstan. Kazakhstan issued the first CO2 permits for its ETS in June.
Mexico. Mexico is finalising legislation on a carbon tax covering producers of gasoline, diesel, propane, butane and coal. Companies can avoid the tax by purchasing Kyoto offset credits.
South Africa. In May South Africa released plans for a carbon tax from 2015. Companies may be able to use Kyoto offset credits to meet a portion of their liabilities.
South Korea. South Korea has launched a taskforce to set carbon caps and rules for the nearly 600 companies to be covered by its emission trading scheme, which will start in 2015.
Erwin Jackson | Deputy CEO, The Climate Institute | 03 9600 4039
Kristina Stefanova | Communications Director, The Climate Institute | 02 8239 6299