* Tianjin scheme possible first step to nationwide trade
* Arreon confident of long-term future after pilot ends
By Emma Graham-Harrison
BEIJING, Feb 9 The northern Chinese port city of
Tianjin launched a small-scale energy intensity trading scheme
on Tuesday with three pilot sales, taking a possible first step
towards a nationwide carbon cap and trade scheme.
International heavyweights Citigroup Global Markets and
Gazprom Marketing and Trading were the buyers of a first set of
"Carbon Emission Allowances", for energy savings equivalent to
around 4,500 tonnes of coal, from three suppliers of heating.
After validation and verification, the more than 500,000
yuan ($73,250) deal could result in the trade of up to 11,500
CEAs, the companies involved said in a statement.
"The traded unit is carbon emission credits, but it comes
from the energy intensity target," clean energy firm Arreon,
which has helped define the scheme's structure, told Reuters in
a written answer to questions about how it works.
"Participating entities out-performance of the energy
intensity cap is 'energy saving', which can be converted to
carbon reduction by applying a factor equivalent to the carbon
intensity of the energy source."
This year the scheme, run by the Tianjin Carbon Exchange,
will cover only some heat supply firms and hospitals, trading
under targets set as part of an overall energy intensity goal
handed down to Tianjin by the central government.
The role of Citigroup and Gazprom is similar to that of
liquidity providers, Arreon said. The deal is worth little to
such large firms, but they are likely looking to stake out a
presence in what could rapidly become a very lucrative market.
Arreon CEO John Shi said he is confident that there will be
a long-term future after the pilot finishes at the end of this
year, because of Tianjin's commitment to becoming a low-carbon
hub, and Beijing's pledge to cut carbon intensity.
"Let's just wait until half a year later, a year later," he
said when asked if the scheme had a future beyond 2010.
"We want to expand this into China's first realistic,
implementable, carbon intensity trading scheme. We are committed
to that," he added.
The backing of a city government eager to turn the city into
a clean energy hub could potentially help Tianjin see off
competition from several other pilot exchanges, including ones
in Beijing and financial hub Shanghai.
"As a national pilot region, the Binhai New Area will use
market forces and financial innovation to develop a low carbon
economy," said Deputy Mayor Cui Jindu, who has directed the
creation of the market through regular meetings with the Tianjin
Carbon Exchange and Arreon.
(Editing by James Jukwey)