Futures not in store for carbon plan

International trades also barred as policy finalized, UN panel told

China has ruled out the possibility of introducing carbon futures and of opening the market to foreign participants in the early stage of the carbon trade policy, China’s top climate envoy said.

At a panel discussion during the United Nations Climate Conference in Bonn, Germany, China’s special representative on climate change Xie Zhenhua said he is confident that the nationwide carbon trade market, awaiting final approval from the State Council, will open this year as scheduled, but he remained cautious in describing some policy designs in their early stages.

He said transactions will be allowed only among real carbon emitters, and no carbon futures trades will be allowed, at least in the short run.

“China will strive to avoid excessive investment and excessive financial derivatives,” he said. “We worried that introduction of financial products at the early stage may cause chaos in the market.”

Transactions will be made among participants from a few industries at the beginning, he said, without elaborating on specific sectors.

More sectors will be added to the policy in the future, depending on the nation’s overall emission reduction progress, he added.

“The carbon trade market is established to reduce carbon emissions by creating a market cost for carbon emitters,” he said. “The policy serves mainly as a policy tool to encourage fewer carbon emissions, not speculative behavior.”

Echoing his remarks, He Jiankun, deputy director of National Climate Change Expert Committee, said China needs to ensure in the top-level policy framework that the carbon market is designed to help China meet emissions targets, otherwise speculative bidding could drive up the price of carbon to levels that may prevent participants from getting involved in actions to reduce their carbon output.

“We have a lot to do to improve our own framework and infrastructural construction. We need to accomplish our own tasks at first,” said Xie. “But we are always willing to enhance cooperation on tech issues and share experiences with other countries.”

China has prepared long for establishing the nationwide market and has gained some experience from pilot programs introduced at local levels.

By the end of September, some 197 million metric ton of carbon valued 4.5 billion yuan ($679.3 million) have been traded in seven pilot regions, data from the National Development and Reform Commission showed.