China peps up carbon debate

Seven pilot carbon trading schemes planned possible boost for EUETS

If these pilot programmes end up producing an efficient national carbon market, they could have a transforming impact on efforts to tackle climate change and recharge a clean energy industry that attracted more than $260bn of investment last year.

If they fail they will set back hopes for a global carbon trading scheme, not least in the four economies to have approved such a system in the past six months: Australia, South Korea, California and Quebec.

"These schemes are the big news in the emissions trading world and indeed in the climate world," says Henry Derwent, retiring president of the International Emissions Trading Association, the carbon market lobbying group.

They could unleash "a huge international market" driving investment in green technologies across the world for decades, says Sir Nicholas Stern, the British economist who wrote a 2006 review on the economics of climate change.

China’s size and growth mean the fate of the pilots is "one of the most important questions of environmental policy of our time", says a Stockholm Environment Institute study, one of two European reports on the Chinese pilot schemes published last month.

China accounts for nearly a quarter of global carbon pollution and about half the annual growth of energy-related emissions forecast for the next 20 years. That makes it indispensable to any effort to stem emissions.

More significantly, some analysts think if the pilot schemes eventually produce a national trading system, it could link to others and push the rest of the world toward the green holy grail of a global carbon price.

Emissions trading, or cap-and-trade as it is also known, is the policy of choice in the European Union, whose seven-year-old carbon market is easily the world’s largest.

California and Quebec are looking at linking their schemes in what would be the first international connection since the EU market started. But substantial emission cuts require action in the US, the world’s second biggest carbon polluter. US lawmakers have resisted doing anything before their biggest economic rival, China.

"If the Chinese end up with a national scheme that is compatible with the EU’s emissions trading system, it’s game over for the rest of the world," says Tim Yeo, a British Conservative party MP who chairs the UK parliament’s energy committee. He is one of many European legislators to visit China this year to inspect progress on the pilot schemes. "Everyone will have to do it, including the US."
Beijing’s economic planning ministry is setting a challenging timetable for the pilot schemes.

They are due to start in 2013 in five cities – Beijing, Shanghai, Tianjin, Shenzhen and Chongqing – and two provinces, Guangdong and Hubei, with a national scheme expected after 2015 if all goes well.

Rachel Kyte, vice-president of sustainable development at the World Bank, one of several international bodies helping to foster the Chinese schemes, says: "There’s determined leadership around it. "Once they have proof of concept and have ironed out any kinks, they will go far."

Valere Tjolle

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