China set to launch world's largest carbon market

A truck containing used plastic bottles travels along a highway covered in haze in Beijing. China is the world's largest polluter. FILE PHOTO | LIU JIN | AFP

China, the world's biggest polluter, has unveiled plans for a nationwide carbon emission trading scheme (ETS).

In a statement marking the launch, the government State Council outlined details of what is expected to be the world's largest program of its kind.

The council approved the scheme last week, with the National Development and Reform Commission (NDRC) outlining some details of how it will be implemented, NDRC Vice Chairman Zhang Yong said at a briefing.

CARBON DIOXIDE

He said trading activities will be based Shanghai, and will involve 1,700 power companies and more than 3 billion tons of carbon dioxide annually.

That volume, representing a third of China's total carbon emissions, means the scheme will eclipse the European Union's carbon emission trading program, currently the world's largest,

EU’s program is expected to cover the sale of about 1.4 billion tonnes worth of emissions by the end of 2017.

Launching the scheme is seen as a major step in efforts by the world's second largest economy to meet commitments to combat global warming.

Mr Yong did not say when trading would begin or explain or how permits will be allocated.

Experts and analysts say it will take at least a year to put mechanisms in place to facilitate the process.

China, the world's largest source of greenhouse gases, is on an ambitious drive to increase its portfolio of non-fossil fuels to 20 percent of its total energy mix by 2020, an increase from its declared total of 13 percent in 2016.

GLOBAL WARMING

As part of its commitment to the Paris Agreement in December 2015, the populous nation pledged to cap carbon emissions by around 2030.

"The ETS will push industrial plants to eliminate outdated capacity and improve their production," said Jiang Zhaoli, vice director at the climate change department of the NDRC.

Nine regions and cities, including Jiangsu, Fujian and seven regions where pilot schemes have taken place, will coordinate to establish the ETS system, the NDRC said.

Details of the plan come a day after US President Donald Trump's administration laid out a new national security strategy plan that struck out a description of climate change as a national security threat.

President Trump, who has repeatedly dismissed climate change as “a hoax”, has threatened to withdraw the United States from the Paris climate accord unless it is changed to accommodate his administration’s coal and gas policies.

Prominent supporters of clean energy led by former US Vice President Al Gore welcomed the move.

"With the top global polluter enacting policies to support the Paris Agreement and transition to a low carbon economy, it is clear that we're at a tipping point in the climate crisis," he said.

"It is important that the world's largest emitter should lead on climate ... China has stepped up its climate leadership dramatically in recent years and is now increasingly seen as filling the leadership void left by the US," said Fred Krupp, president at the US Environmental Defense Fund, backing Mr Gore’s sentiments.

According to a Reuters report, initial Chinese state plans will eventually rope in eight industrial sectors including iron and steel, chemicals and paper-making.

First mooted in 2016, the launch of carbon trading in China ran into delays as market designers struggled to handle problems like accuracy of emissions data.

The market-oriented ETS will help companies reduce emissions and cut back on carbon-intensive industrial assets through controlled allocation and trading of carbon emission allowances.

China has not yet considered linking its ETS with other countries at this stage, said NDRC director Mr Li Gao, adding it will also take time to set a national carbon price.