China plans carbon trading pilot scheme

China will introduce a pilot scheme for carbon emissions trading and gradually develop a national market as the world’s largest polluter seeks to reduce emissions and save energy, state media said.

China will promote the market’s development through “punitive” electricity tariffs on power-intensive industries and other new policies, Xie Zhenhua, a top climate official, was quoted by Xinhua news agency.

The report gave no timetable or other specifics on how the system would work.

However, China has said previously it hoped to introduce a pilot scheme in a handful of major cities by 2013 and expand it nationally in 2015.

Faced with severe pollution, a predicted surge in urbanisation and a struggle to ensure adequate energy supplies to fuel its rapid growth, China has outlined plans to reduce carbon emissions in its latest five-year economic plan.

Carbon trading typically involves the setting of absolute limits on how much carbon dioxide emitters such as industrial enterprises can produce.

Once those are reached they can then purchase the unused emission allowances of other parties who have come in under their limits.

Environmental analysts have said China is keen to get a functioning carbon trading market up and running soon, especially with the expiry of the Kyoto Protocol looming in 2012.

China and other developing nations have not been bound by the protocol to reduce emissions of the gases blamed for global warming and climate change.

But it remains unclear what a future new protocol would call for with China under pressure to rein in emissions growth since it surpassed the United States as the world’s largest greenhouse gas source in recent years.