Insight
Carbon trading sees a surge in China
Last Updated: 2013-12-11 15:13 | CE.cn
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By Lin Huocan

Since June, Chinese mega-cities of Shenzhen, Shanghai, and Beijing have in succession launched carbon emissions trading schemes, and carbon trading enter the markets of Tianjin and other cities in Guangdong by the end of the year.

Carbon trading can not only have immense market potential, but also form a forcing mechanism to promote energy-saving and emission-reduction on the whole.

How big is the market of carbon trading?

It is predicted that carbon market in China will cover 0.7-billion-tons carbon emissions by the year of 2014. When a nationwide carbon market comes into being in the "13th Five-Year Plan" period, China will become the world's largest carbon trading market.

In June, Shenzhen launched carbon trading platform and became the first city of China to start the pilot program.

After Shenzhen has got the carbon trading market in gear, quota of 635 industrial enterprises and 197 large public buildings has entered into carbon emission trading system. The market completed 8 transactions in the first day with a total quantity over 20 thousand tons and a total value of RMB0.61 million Yuan. At present, carbon price in Shenzhen has appreciated substantially from RMB28 Yuan/ton to 80 Yuan/ton, the cumulative transaction volume has been over 0.12 million tons and the value has exceeded RMB8 million Yuan.

The smooth opening of Shenzhen carbon trading market and the huge market space behind it have to some extent indicated the broad prospect of China's carbon trading market. Before the opening of Beijing and Shanghai carbon trading market, lots of investors had predicted that these two markets would be hotter than Shenzhen.

Through the "market maps" of the pilot provinces and cities, the huge market space behind carbon trading pilots has gradually surfaced. According to estimates, global carbon trading market scale was as high as EUR50 billion per year during the past four years, and is expected to reach USD3.5 trillion to the year of 2020 and overtake oil market to be the largest trading market of the world.

Carbon trading started late in China, but "Chinese team" is running to the market. Experts point out that China is under the heavy pressure of energy-saving and emission-reduction, while carbon trading can offer a market mechanism with low-cost and high-efficiency to achieve the energy-saving and emission-reduction task. Therefore the prospect of carbon trading market in China is worth anticipating.

Relevant institutions have predicted that Chinese carbon market will cover 0.7 billion tons carbon emission to 2014, while the figure will be 0.382 billion tons, 0.165 billion tons and 2.1 billion tons respectively in Australia, the USA and Europe. When nation-wide carbon market will has been built in the "13th Five-Year Plan" period, China will become the world's largest carbon trading system.

How will carbon trading promote energy-saving and emission-reduction

Carbon trading is able to form an action forcing mechanism for energy-saving and emission-reduction in the whole society. Taking the initial emission-reduction responsibility as the benchmark, over-emission enterprises will bear huge polluting cost while emission-reduction enterprises will be rewarded "money".

Du Shaozhong, President of China Beijing Environment Exchange, has recently said to the media that the success of carbon trading market cannot be evaluated simply by the trading volume and activity, but should be determined whether carbon trading can form an action forcing mechanism for energy-saving and emission-reduction in the whole society or not.

Du Shaozhong has made the point. Carbon emission permits trade is generally considered as an important economic leverage to promote the emission-reduction of greenhouse gases, deal with climate change and improve the resource utilization efficiency. How are such roles played in practice?

It is introduced that initial emission-reduction responsibilities can be allocated in the carbon emission permits trading system to enterprises with high energy consumption, high pollution and high emission; over-emission enterprises need to buy the carbon emission permits through the transaction platform of Environment Exchange. Enterprises can also reduce the carbon dioxide emission by all means and sell the surplus carbon emission permits quota through Environment Exchange.

This kind of market transaction behavior takes carbon emission permits as the subject matter can bring two benefits. On the one hand, enterprises reduced emission in the past to fulfill the social responsibilities, which was hardly reflected by the "money" benefits directly. With such a platform, surplus emission permits quota can be traded; the higher the surplus quota, the higher the benefits, which can directly dampen the production cost. On the other hand, some enterprises didn't have significant economic losses due to over-emission in the past, but they will bear higher production cost by over-emission since the transaction platform appeared. This kind of link with the cost will directly promote enterprises to increase input in emission-reduction and accelerate the transformation and upgrading of industrial structure and the transition of development mode by means of technology innovation.

Chen Haiou, President of Shenzhen Emission Exchange, said that the enterprises' attitude of carbon emission has been changed obviously since the launch of carbon market. The target of energy-saving and emission-reduction used to be delivered from the central authorities to the local, but now enterprises have been aware that carbon emission management can be linked up with profiting, cash flow and investment, thus emission-reduction has become a voluntary and conscious behavior of enterprises.

Moreover, the reporter also learned that in the carbon trading pilots, some provinces and cities not only explore to promote emission-reduction by market mechanism, but also pay great attention to guiding individual participation. For example, individuals are able to join in carbon emission trade in Shenzhen, citizens can purchase the quota of enterprises. This kind of pioneering work, which sparks the public-benefit enthusiasm of citizens, can make the public to be more conscious of energy-saving and emission-reduction.

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