2010-07-22 14:27

Efforts to reduce greenhouse-gas emissions through domestic cap-and-trade systems have acquired new urgency, as China is set to become the world's largest emitter and energy user in the coming decade.

In the absence of a functioning global cap-and-trade system that is widespread enough to fight climate change effectively, Chinese policymakers should do what they can to develop similar domestic programs to promote energy efficiency and clean energy sources that will both enhance energy security and deal effectively with climate change.

China has already achieved some progress in voluntary carbon trading. Expanding such an experimental system and successfully applying it to certain industries or regions would however require the introduction of a proper price tag on carbon emissions.

The country has set a target to reduce emissions intensity - the amount of carbon dioxide emitted per unit of gross domestic product - by 40 percent, and up to 45 percent from 2005 levels, by 2020.

A domestic cap-and-trade mechanism will ensure that investors in clean energy benefit from the sale of carbon credits and consequently be encouraged to further expand the supply of greener alternatives. Stimulus on the supply side alone will not be able to push Chinese consumers to adopt a low-carbon lifestyle fast enough.

As Chinese people start consuming more, a price tag on carbon emissions is badly needed to compel consumers to help the country meet its even greater energy needs.

As a fast-growing developing country, China has reasons to worry about the fairness of some developed countries' proposal to price carbon emissions as part of a global effort to fight climate change.

Yet, a domestic trial free from international disputes over sharing of responsibilities between developing and developed economies would be much more desirable. If properly implemented, it can also lay the foundation for a binding global agreement on cutting carbon emissions.