Cap and Trade in China: Shanghai, Beijing and Tianjin establishing emissions exchanges
The Wall Street Journal recently reported that China is taking steps to set up a nationwide emissions trading system. Specifically, the cities of Shanghai, Beijing, and Tianjin are in the process of setting up emissions exchanges modeled on the cap-and-trade system developed in the United States to control sulfur dioxide emissions. The Shanghai and Beijing exchanges were launched in early August, and the Tianjin Climate Exchange was launched in late October. The Tianjin exchange is a joint venture formed by Chinese and American partners, including the giant energy conglomerate China National Petroleum Corp. (CNPC), which is the parent of PetroChina, China’s largest oil and gas producer and distributor, and the Chicago Climate Exchange, the company behind the world’s first voluntary trading system to reduce emissions of greenhouse gases.
China’s establishment of these exchanges represents a small positive step forward for the country, which is now recognized as the world’s leading emitter of carbon dioxide, but setting up these exchanges may be considered a symbolic act rather than a practical measure designed to mitigate emissions. China’s 11th Five-Year Plan (2006-2010) calls for reducing “major pollutants” by 10 percent. Last year China also promulgated its National Climate Change Programme, setting forth the country’s positions and plans for dealing with climate change. In particular, China advocates the mitigation of greenhouse gases, “adaptation” to climate change, enhanced technology cooperation and transfer, full implementation of the United Nations Framework Convention on Climate Change, and regional cooperation on climate change.
Another fundamental position held by China is that developed countries should take the lead on the issue of climate change. As explained in a Congressional report released earlier this fall, “China has long believed that established industrial powers need to act first because they built their wealth largely by burning fossil fuels and adding to the atmosphere’s greenhouse gases.” This position was echoed last month by Vice-Minister Xie Zhenhua of China’s National Development and Reform Commission when China released a white paper entitled “China’s Policies and Actions on Climate Change.” Mr. Xie said that, “developed countries should, at least, contribute 0.7% of their GDP” to help developing countries combat climate change. The white paper itself did not announce any major policy changes, although there was the occasional startling admission regarding China’s ability to fight climate change: “[China’s] coal-dominated energy mix cannot be substantially changed in the near future, thus making the control of greenhouse gas emissions rather difficult.” If China were to establish a nationwide emissions trading system, that would certainly help make the task somewhat easier.
