China launched its long-awaited emissions trading system on Friday, a key tool in its quest to drive down climate change-causing greenhouse gases and go carbon neutral by 2060.
Trading began at 9:30 am local time (0130) GMT at the Shanghai Environment and Energy Exchange, according to a statement from official news agency Xinhua.
The scheme will set pollution caps for big-power businesses for the first time, and allows firms to buy the right to pollute from others with a lower carbon footprint.
China first announced plans for a nationwide carbon market a decade ago, but progress has been stymied by coal-industry lobbying and policies that pushed for quick growth at the expense of the environment.
Citigroup estimates $800 million worth of credits will be bought for this year, rising to $25 billion by the end of the decade.
That would make China’s trading scheme about a third the size of Europe’s market, currently the biggest in the world.
The market will initially cover 2,225 big power producers that generate about a seventh of the global carbon emissions from burning fossil-fuels, according to data from the International Energy Agency.
Those power producers account for less than a third of the 13.92 billion tonnes of earth warming gases belched out by Chinese factories in 2019.
At a press conference this week, deputy environment minister Zhao Yiming described it as “a key tool to help the country achieve its goal of reaching peak emissions before 2030 and carbon neutrality by 2060.”
But analysts say it is not a quick climate fix and could take years before the world’s biggest polluter changes course.
Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air, said officials had “pared down ambitions” for the scheme, which was originally expected to cover seven sectors, including aviation and petrochemicals.
“China’s coal, cement and steel production have all gone up as the government pours in billions of dollars to energy-intensive sectors to boost growth after the pandemic,” he said.
“Rules to limit emissions will disrupt this growth model.”
The average price for a ton of carbon in China is expected to be about 30 yuan per ton ($4.60) this year — far below the average European Union price of 42 euros ($49.40) per ton, Citic Securities said in a recent research note.
— AFP
