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* To launch 7th pilot emissions market in Chongqing on
* Climate officials look to create nationwide platform by
* NDRC hints at separate nationwide scheme
By David Stanway and Kathy Chen
BEIJING, June 18 China launches its seventh and
final pilot carbon market in the sprawling city of Chongqing on
Thursday, but plans to set up a national trading scheme within
three years remain shrouded in uncertainty in the world's top
emitter of greenhouse gases.
China has pledged that by 2020 it will reduce its carbon
intensity - the amount of CO2 produced per unit of economic
growth - by 40-45 percent from 2005 levels. It has also promised
to set up market mechanisms to help meet its targets.
The ultimate aim of the seven pilot projects, experts had
said, was to "let a hundred flowers bloom" in order to find the
trading system that suits China the most, which would then form
the basis of a national scheme.
"How to unify these markets is an extremely complex issue,"
said Shawn He, a lawyer with the Huamao & Guigu Law Firm in
Beijing who specialises in carbon trading.
"I wouldn't doubt the ambition of the authorities,
especially the National Development and Reform Commission
(NDRC), to create a unified market in three years, but I'm more
concerned about its integrity and quality."
The carbon market in Chongqing follows launches in Beijing,
Tianjin, Shanghai, Shenzhen and the provinces of Hubei and
Guangdong of schemes that force hundreds of local enterprises to
buy permits to cover their emissions.
But these programmes cover only a tiny fraction of China's
total greenhouse gas levels and climate officials say they are
looking at creating a nationwide platform by 2016-2017.
In a speech last week, Sun Cuihua, deputy director of the
climate change office at the NDRC, said a national trading
scheme should be ready for launch within three years.
She, however, added that there was still a great deal of
work to do, including the establishment of national standards.
"We first need to strengthen our statistical work and we
also need to create a carbon emission system nationwide that
covers major enterprises, which is the foundation for any carbon
market," she said.
Nearly 20,000 enterprises across the country have already
received orders from the NDRC to report their greenhouse gas
emissions starting this year.
LINKING PILOTS OR SEPARATE NATIONAL SCHEME
Earlier this year, Su Wei, the director general of the
NDRC's climate office, said a nationwide carbon market could be
created by allowing provinces not covered by the existing pilot
projects to participate in scaled-up cross-regional trading
While this proposal might have enabled high-emitting
provinces like Hebei to participate in carbon markets set up by
neighbouring Beijing or Tianjin, Su has since ruled it out.
According to a transcript of a speech at a closed-door
conference in Shenzhen earlier this month, Su said existing
pilot projects would merely be encouraged to use their expertise
to help other regions "prepare" for a new nationwide scheme.
"The idea of extending the current carbon trading pilots to
other regions is not about establishing a cross-regional market
or extending the current scope of the pilot projects," he said.
Also, even if the seven pilot carbon markets wanted to
cooperate, the permits traded in one jurisdiction are calculated
differently from those elsewhere and are therefore incompatible.
The schemes have been tailored to match each region's
economic development and so they also differ in the number of
permits allocated to firms and in their focus, with wealthy
Shenzhen looking to curb building or transportation emissions
and Hubei trying to rein in heavy industries like steel.
One possibility is that China will create a separate
nationwide scheme that will not be derived from the pilots, and
Sun, the NDRC climate change office's vice-director, hinted last
week that this might be one of the options now being considered.
The NDRC will bring out draft national regulations by the
end of the year that will give the state planning agency the
legal foundations to issue carbon permits itself, she said,
adding that a nationwide scheme cannot just be created by
integrating and extending the existing platforms.
"Because the pilots are currently independent, if we extend
them to other regions or other markets, they will remain
unconnected and it will remain an incomplete market," she said.
But the lawyer from Beijing, He, disagreed.
The pilots have legal force only until 2016, and if the NDRC
creates a separate nationwide scheme, it would have to let the
local schemes fall into abeyance to avoid a dual market.
"I think some form of integration (of existing markets) is
the most reasonable solution," He said.
(Editing by Himani Sarkar)