Qingdao city next in line to set up emissions market in China

Tue Feb 18, 2014 10:22am GMT

* Advisers, backed by city's mayor, drawing up rules for emissions trading

* City plans binding CO2 caps on up to 300 major firms

* Scheme to trade CO2 permits could start next year

* Beijing intends to launch national carbon trading; timing unclear

By Kathy Chen and Stian Reklev

BEIJING, Feb 18 (Reuters) - Qingdao has become the latest Chinese city to plan a market to reduce greenhouse gas emissions, as a group of advisers backed by its mayor is hammering out rules for an emissions trading scheme that could start next year.

Qingdao, a city of 3 million people in northeastern Shandong province with a GDP equal to that of Bangladesh, is a major energy consumer as the local economy relies on heavy industry and petrochemicals.

In a bid to meet a target of cutting carbon emissions per unit of GDP to 19-20 percent below 2010 levels by 2015, the city now plans to impose binding CO2 caps on up to 300 of its biggest companies and launch a market for trading CO2 permits.

"The political will is strong as the work is led by the mayor," Wang Ke, the director of Renmin University's energy and climate economics programme, told Reuters.

Wang is advising the Qingdao government on its climate strategy and leads the work of designing rules for its carbon market, which would launch next year if approved by the local government.

PILOT SCHEMES

China's central government has picked seven key regions to launch pilot carbon trading schemes with the intention of setting up a national market as Beijing seeks to cut emissions per unit of GDP by 40-45 percent from 2005 levels by 2020.

Beijing, Guangdong, Shanghai, Shenzhen and Tianjin have launched markets, with Hubei province to follow next month and Chongqing later this year.

But the exact launch date of a national market remains unclear - most observers expect it to begin in 2019 or 2020 - and Qingdao is the latest of a number of big-emitting regions looking to create their own markets to deal with the twin challenges of climate change and air pollution.

The central government is reluctant to appoint more official pilot markets, but is happy to encourage other regions to set up markets as it might gain them valuable experience when a national scheme kicks in.

Hangzhou in Zhejiang province in July started trading energy consumption permits, while Shenyang in northern Liaoning a few months later launched a voluntary market for CO2 allowances.

Shandong's Jining city in August released a climate plan proposing a city-wide emissions market.

Two months earlier, lawmakers in the major manufacturing province Jiangsu said they might set up a similar market to help modernise its big-emitting industries.

Setting up local markets is an easily accessible policy for local governments that have been imposed mandatory emission targets from Beijing but lack the authority to impose a carbon tax or energy consumption cap locally, said Song Ranping at the World Resources Institute in Beijing. (Editing by Muralikumar Anantharaman)

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