CHINA OPENS EMISSIONS EXCHANGE
Analysts concerned with low cost of pollution, but Beijing says it’s just the start
CHINA launched its longawaited emissions trading system yesterday, a crucial tool in its quest to drive down climate change-causing greenhouse gases and go carbon neutral by 2060.
The scheme was launched with the world’s biggest carbon emitter seeking to take a global leadership role in the climate crisis
in the lead up to a crucial United Nations summit in November.
China has hailed it as laying the foundations for what would become the world’s biggest carbon trading market, forcing thousands of local companies to cut their pollution emissions or face deep economic hits.
The programme was launched just days after the European Union (EU) unveiled its plan to achieve carbon neutrality by 2050.
Deep questions remain over the limited scale and effectiveness of
China’s initial emission trading scheme, including the low price placed on pollution.
More broadly, analysts and experts said much more needed to be done if China was to meet its environmental targets, which includes reaching peak emissions by 2030.
China first announced plans for a nationwide carbon market a decade ago, but progress was slowed by the influential coal-industry lobby and policies that prioritised economic growth over the environment.
The scheme will set pollution caps for big-power businesses for the first time and allows firms to buy the right to pollute from others with a lower carbon footprint.
The market would initially cover 2,225 big power producers that generate about a seventh of the global carbon emissions from burning fossil fuels, according to data from the International Energy Agency.
Those power producers account for 30 per cent of the 13.92
billion tonnes of Earth warming gases belched out by Chinese factories in 2019.
Citigroup estimated that US$800 million worth of credits would be bought for this year, rising to US$25 billion by the end of the decade.
It will make China’s trading scheme about a third the size of Europe’s market, currently the biggest in the world.
The scheme was originally expected to be bigger in scope, covering seven sectors, including aviation and petrochemicals.
But the government “pared down ambitions” as economic growth took precedence amid the pandemic-induced slowdown, according to Centre for Research on Energy and Clean Air lead analyst Lauri Myllyvirta.
“China’s coal, cement and steel production have all gone up as the government pours in billions of dollars to energy-intensive sectors to boost growth after the pandemic,” said Myllyvirta.
“Rules to limit emissions will disrupt this growth model.”
Another concern for environmentalists is the low price China is placing on pollution.
Opening trade at the market in Shanghai started at 52.7 yuan per tonne of carbon yesterday morning. The average carbon price in China is expected to hover only around US$4.60 this year — far below the average EU price of US$49.40 per tonne, Citic Securities said in a research note recently.
Free pollution permits were given out at the start and token fines for non-compliance would keep prices low, said analytics company TransitionZero.
However, China has characterised yesterday’s launch as just the first step.
The scheme will include cement producers and aluminium makers from next year, Zhang Xiliang, chief designer of the scheme, said last week.
“The goal is to expand the market to cover as many as 10,000 emitters responsible for about another five billion tonnes of carbon a year,” said Zhang.