UNFCCC side event spotlights China carbon market

Top officials of China's three climate and environmental exchanges have shown up at two UNFCCC side events held two days in a row in Tianjin, stealing the limelight of other activities at the climate change talks.

China has yet to implement a national cap on emissions and currently all carbon credits are being traded voluntarily. Even so, the prospects of China's carbon market have become a hot issue due to the huge market potential and lucrative opportunities for business people beyond national boundaries.

In China's latest national drive to pursue a low-carbon experiment in five provinces and eight cities, the country intends to trial a carbon market within
the low-carbon pilot areas and only for some certain economic sectors. The power industry is one potential sector where the pilot initiatives will be employed. The power industry often has a better record and availability of economic data and is better prepared to demonstrate carbon trading.

However, Yi Gang Wang, Deputy General Manage of China Beijing Environmental Exchange said, "in my own opinion, I cannot understand the (geo-economic) logic of operating a carbon market within the low-carbon pilot areas."

Mr. Wang gave a detailed presentation on October 7th on the key factors in deciding on the carbon price in China, and the implications of government policies such as subsidies and free credit allocation.

Asked whether improved performance of the three climate exchanges in Beijing, Tianjin and Shanghai would send a signal demanding the government to cap emissions in the near term, Ms. Mu Lingling, Vice President of Tianjin Climate Exchange, responded from a different perspective. The key issue was not whether an emissions cap should be imposed or not, she said. It was instead, important to build a mature carbon market on the ground.

Ms. Mu said she was confident that experience and lessons drawn from China's CDM projects will give a boost to the country's ability in operating a carbon market in the near term.

Meanwhile, Miss Li Jin, Business Supervisor, Research and Development Department of the Shanghai Environment and Energy Exchange said China still needs to learn from overseas practices, such as EU ETS and RGGI, a power sector-focus carbon market covering 11 states in northeast United States, for trading standards and business-engaging mechanisms.