China Puts a Price on Carbon

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Posted by Neno Duplan

China, the world’s largest emitter of carbon dioxide, is preparing for a national carbon market. With seven cities in the nation already starting carbon markets, China has had the opportunity to take notes from both California and the European Union (EU) on how to avoid pitfalls, such as oversupply.

China has decided to follow California by requiring carbon emitters to bid for allowances. The country’s goal is to reduce emissions and phase out the high levels of pollution caused in production processes, and it believes a carbon market will be the lowest-cost way of reaching these targets, with a marginal cost of about 50 yuan ($8.21) for each ton of emissions reduced.

By placing a price on carbon, one of China’s main goals is to reduce its demand for power, which is forecasted to decrease by approximately 16 percent in the next three years, which in turn will reduce carbon emissions. Vice mayor of the southern Chinese city Shenzhen, Tang Jie, mentioned that he kept in close contact with the California Environmental Protection Agency (EPA) when designing its program, which was launched in June and has already seen 120,000 tons exchanged. He also stated that China is learning from California and the EU, withholding allocations, and creating permit reserves.

According to Matthew Rodriquez, secretary for environmental protection at the California EPA, China’s adoption of a carbon market has been impressively quick. “What took California six years to get started, it has taken the Chinese provinces and governments six months to get started and that’s a remarkable achievement,” he said.

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