Carbon market may expand by next year

Pilot program in progress, but many cities will need more time to prepare, say experts

A national carbon market will start in late 2016 or early 2017, a senior climate official said on Monday, adding that China's post-2020 climate action plan will inject fresh impetus into this year's climate change meeting in Paris.

The market is part of China's larger strategy to promote green, low-carbon development. Trials are already underway in seven locations.

"China is expected to start operating a national carbon market on a trial basis by the end of next year or in early 2017," Su Wei, director-general of the department of climate change under the National Development and Reform Commission, said on the sidelines of an event on Monday, which was the National Low-Carbon Day.

The NDRC hosted a series of events to promote public awareness of climate change and low-carbon development.

Recent media reports said that the Beijing-Tianjin-Hebei region has initiated efforts to build China's first inter-regional carbon market.

"We expect inter-regional cooperation will win more support for the carbon market, but the goal is to establish a national market, instead of regional markets," said Su.

If a national market opens in 2017, it would be later than the government's initial target, which was for a 2016 opening. "Next year would be too rushed, particularly for the non-pilot cities.

It would be very challenging for them to build capacity and methodology," said Simon Chen, a Beijing-based analyst with ICIS, an energy consultancy.

The pilot program covers seven locations: the cities of Shenzhen, Beijing, Shanghai, Tianjin and Chongqing and the provinces of Hubei and Guangdong.

Some 24 million metric tons of carbon dioxide equivalent were traded under these plans in 2014, with a value of 123 million euros ($137.9 million), according to Thomson Reuters.

Xu Huaqing, deputy director-general of the National Center for Climate Change Strategy and International Cooperation, said that some non-pilot cities including Chengde and Zhangjiakou in Hebei province and Hohhot and Erdos in the Inner Mongolia autonomous region have joined Beijing's trial program.

Xu said that it is important for the country to get its climate change law completed, and the pilot regions and developed eastern coastal regions should set a cap on emissions during the 13th Five-Year Plan (2016-20).

There are some interim rules covering the trading of emission rights, but a more formal regulatory framework is needed, including a complete accounting, auditing and tax system, said Wang Yi, a professor of environmental and energy policy at the Chinese Academy of Sciences.

The Chinese government is expected to submit proposals for cutting greenhouse gas emissions to the Framework Convention on Climate Change by the end of this month.

Those targets are known as Intended Nationally Determined Contributions, and they describe what post-2020 climate actions countries will take under a new international agreement.

China's climate action plan will inject new political impetus into talks in Paris and show China's "ambition and commitment" to addressing climate change, said Su, without giving an exact timetable.