China is likely to allow seven to 10 carbon exchanges to operate when it launches its national emissions trading system in mid-2016, a government official said Wednesday.
The seven exchanges operating in China’s regional pilot carbon markets have been competing fiercely for the past year under the assumption that only two or three would be allowed to operate when the national scheme begins next year.
But at an industry conference in Beijing Wednesday, Jiang Zhaoli, a director in the climate change department of the National Development and Reform Commission (NDRC), said all seven might continue under the unified system.
“We need to have a certain number of exchanges, and seven to ten is the optimal number,” said Jiang.
He stressed that he was sharing his own opinion and that it was up to the government to make a final decision.
SUMMER 2016 START
Jiang said he hoped the national market could start in summer or early fall next year, just after the seven pilot schemes have finished compliance procedures for the 2015 emissions year.
He said five sectors had been picked to participate: power, metallurgical industries, non-ferrous metals, building materials and chemicals. In addition, aviation might be included.
From January 1, 2016, each province will be given an emission target – either intensity-based or absolute – by the central government.
In the first phase of the ETS, which will run over 2016-2019, provinces can to a certain degree decide if they want to participate in the scheme or meet their target through other measures.
However, observers expect the richer provinces along the eastern seaboard to face substantial pressure to join the ETS from the start.
Jiang made it clear on Wednesday that the seven pilot schemes would join the national ETS from the start, and that their individual rules on allocation, MRV and other standards would have to be adjusted to fit new rules to be drawn up by the central government.
PILOT LESSONS
Experiences from the pilot schemes so far have been mixed. The five markets that opened in 2013 achieved a high rate of compliance, but have struggled with poor liquidity and a lack of public data.
“We must ensure openness and transparency,” Jiang said. “The success of the market will be determined by the weakest link, not the strongest.”
He also told the conference that China remained focused on an emissions market, not a tax.
“We believe that under current circumstances in China, carbon emissions trading is more suitable than a tax,” he said.
Only when a market has been developed would it make sense to work on a carbon tax, Jiang said.
By Stian Reklev – stian@carbon-pulse.com
