Sichuan province in southwestern China aims to launch the nation’s eighth regional pilot carbon market this year, state media reported Friday.

The provincial carbon exchange is hopeful that a pilot ETS will be up and running before the end of 2016, covering nearly 300 companies that are expected to be included in the national cap-and-trade system when it launches next year, state-owned Xinhua news agency reported.

Xinhua quoted He Jinfeng, chairman of the exchange, with several sources confirming to Carbon Pulse that the provincial government backs the plan.

However, one source told Carbon Pulse it was unlikely the province would have time to set up its own trading scheme, and that a more probable outcome was that local emitters would be able to trade offsets, known as CCERs, on the exchange before joining the national market.

Sichuan, located on Tibet’s eastern border, has a population of 81 million people and an annual GDP of nearly $500 billion. A hub for hydro power, the province gets some 30% of its electricity from non-fossil sources, but relies heavily on coal for the rest.

It is also home to heavy industry such as iron and steel, as well as lighter manufacturing including building materials and wood processing.

China already has pilot markets in two provinces and five cities, and plans to launch a national ETS in the second half of 2017.

However, slow progress in putting in place a national ETS law has led to some observers questioning whether the scheme will be launched in time.

If Sichuan’s market opens this year, CO2 caps are likely to be backdated to Jan. 1, 2016, and it would only run for one or two years at most.

However, He said a local ETS would stimulate the decarbonisation of the economy and provide the province with valuable carbon trading know-how.

By Stian Reklev – stian@carbon-pulse.com

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