China estimates it needs a 100 yuan carbon price to peak emissions by 2030

Published 11:52 on December 4, 2015  /  Last updated at 11:52 on December 4, 2015  /  China, China's National ETS, Climate Talks, International  /  No Comments

China’s latest estimate is that it needs a carbon price of around 100 yuan ($15.62, €14.38) in its national emissions trading scheme to meet its target of peaking its greenhouse gas emissions by 2030, a government researcher involved in the ETS design process said on the sidelines of the UN climate talks in Paris on Friday.

China’s latest estimate is that it needs a carbon price of around 100 yuan ($15.62, €14.38) in its national emissions trading scheme to meet its target of peaking its greenhouse gas emissions by 2030, a government researcher involved in the ETS design process said on the sidelines of the UN climate talks in Paris on Friday.

China’s initial estimate had been 60 yuan per tonne, but that had been adjusted up due to recent falling coal prices, according to Chai Qimin, deputy director of the strategy and planning department of government think-tank National Center for Climate Change Strategy and International Cooperation (NCSC).

Analysts expect EU ETS prices to reach that level towards the end of this decade, but the 100 yuan price would be more than twice current levels in the Shenzhen carbon market, the highest-priced Chinese pilot ETS. It would be eight times the current price in Shanghai’s market.

“If the market is not tight, it won’t mean anything for China,” Chai told Carbon Pulse, stressing that the national ETS, due to be launched in 2017, needs to help drive the shift away from coal to cleaner energy sources.

The 100 yuan estimate helps inform officials currently working on designing China’s national market on allocation levels, although it would get adjusted again if there are significant moves in fuel prices.

PREDICTABILITY

Chai’s comments came during a side event at the Paris climate talks focusing on the need for carbon prices to be high enough to have an impact.

“It’s not enough to have a carbon price, it has to be high enough to drive investment at scale,” Nigel Topping, CEO of business group We Mean Business, which arranged the event, said.

Panelists also stressed the need for certainty around price trajectory and market regulations.

“Price is a function of ambition,” said Rachel Kyte, the World Bank’s special envoy for climate change.

“If ambition is turned into a partisan football, you’re going to have problems getting a system that works,” she added.

A number of carbon markets, including the EU ETS and the New Zealand scheme, have struggled with low prices for years, sparking criticism that they have failed to help drive emission reductions.

Meanwhile, Australia and the US state of New Jersey, both introduced carbon pricing programmes only to remove them later.

If the system in place is not stable and predictable, business is likely to simply delay their investment decisions instead of cutting emissions, said Bruno Lafont, co-chair of French-Swiss cement producer LafargeHolcim.

PRICE CORRIDOR

Earlier this week, We Mean Business’ Topping said his group would steer a panel of experts to regularly meet to publish a view of what carbon prices globally may need over next 15 years.

This so-called Future Carbon Pricing Corridor panel aims to report to the first meeting of the Carbon Pricing Leadership Coalition, a public-private global body, in April in Washington DC.

“We are finding more and more that business/investors/policymakers need some idea of what the future trajectory of carbon prices will need to be to be on track,” Topping said.

By Stian Reklev – stian@carbon-pulse.com

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