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© Reuters. File photo: On October 31, 2010, a coal-fired power plant can be seen behind a factory in the Inner Mongolia Autonomous Region of China. REUTERS/David Gray
Authors: Muyu Xu and David Stanway
BEIJING (Reuters)-China’s Ministry of Environment said on Wednesday that the long-awaited National Emissions Trading Scheme (ETS) will begin trading later this month and provided an update on what is expected to be launched in June.
The new carbon emissions trading system is part of China’s plan to use a “market mechanism” to help its carbon emissions-currently the highest in the world-peak by 2030 and reach net zero emissions by 2060.
But the long-awaited plan was repeatedly postponed, partly because of concerns about the transparency of emissions data, and a case of falsified data by a power company was exposed this month.
Zhao Yingmin, deputy minister of the Ministry of Ecology and Environment, said at a press conference that the preparations are now “basically complete.”
He added: “We will launch the national carbon trading system at a suitable time and conduct trading in July.”
Although Zhao did not give an exact date for the first transaction, sources familiar with the ministry’s plan are expected to hold a launch ceremony on Friday.
Carbon trading was originally expected to start before the end of June, but no reason for the delay was given.
China expects its ETS to become the world’s largest carbon trading market.
Later on Wednesday, the European Union is expected to announce an ambitious plan to combat climate change, including a comprehensive reform of its ETS.
Carbon price
Before signing the Paris climate agreement at the end of 2015, President Xi Jinping promised for the first time to establish a national trade plan in China. The plan was “soft-launched” at the end of 2017, but no transactions were conducted.
China has established seven local pilot exchanges, and as of the middle of last year, 406 million tons of greenhouse gas licenses were traded.
Zhao said that the first phase of the national carbon emissions trading system will cover more than 2,000 power plants and will expand to other industries in due course, including cement, steel and aluminum, but he did not provide an accurate timetable.
Zhao said that the accuracy of emissions data is the top priority of the national carbon market. He added that after years of data reporting and verification, the quality of the national ETS data is now basically in line with the requirements.
Like other carbon exchanges, China’s ETS assigns emission permits to participating companies, which can use them for their own compliance purposes or sell them on the market.
However, China’s system is based on the amount of carbon produced per unit of output, not the absolute level of emissions, which means that the total amount of carbon dioxide cannot be reduced in the short term.
Zhao said that the exchange’s carbon price was “unpredictable,” but pointed out that the average price of the seven pilot exchanges was 40-50 yuan (US$6.18-7.72) per ton.
“If the price is too low, it will weaken the enthusiasm of enterprises to reduce emissions,” he said. “Too high will bring an excessive burden to high-carbon companies.”
($1 = 6.4754 yuan)
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