Dec. 20 (NBD) -- The National Development and Reform Commission of China issued a construction scheme of national carbon trade market, under which the market will be open only to the power generation sector during its early phase.

Zhang Yong, vice-minister of the commission, said at a press briefing that the scheme identifies the power generation industry as a starting point to steadily propel the construction of carbon trade system and the scheme will be the guiding document at present and at next stage afterwards.

With regard to the influence the scheme has on the power generation sector, Lin Boqiang, dean of China Institute for Energy Policy Studies at Xiamen University, told NBD that the scheme, at the early stage, will negatively impact the thermal power enterprises with a high energy consumption due to higher costs.

Lin also noted that such disadvantage will push high-emission enterprises to eliminate outdated capacity, which will help to optimize the power and energy structure. 

Carbon trading in China is likely to grow into a one-trillion-yuan market

According to the scheme, each enterprise is assigned an emission quota. If emission exceeds what is permitted by its allowances, an installation must purchase allowances from others. Conversely, if an installation has performed well at reducing its emissions, it can sell its leftover credits.This allows the system to find the most cost-effective ways of reducing emissions without significant government intervention.

Earlier in 2013, Beijing, Tianjin, Shanghai and Guangdong Province launched pilot carbon trade projects which covers power and cement sectors. Those pilot programs have laid a foundation for the national carbon trade system.

Zhou Bo, executive vice mayor of Shanghai, introduced that since 2013, a total of 310 key enterprises from 27 sectors, industrial and non-industrial, have participated in carbon trading under the pilot project.

According to a report released by Sinolink Securities, China's carbon trade market takes 2nd place in the world. As of October this year, the accumulative quota trading volume reached 406 million tonnes of carbon dioxide equivalence and the turnover stood at 10.2 billion yuan (1.54 billion U.S. dollars).

The report also shows that China's carbon quota trading will grow into one-hundred-billion-yuan market in a short term and expand to a one-trillion-yuan market in a long run.

In the meantime, the market of China Certified Emission Reduction (CCER) becomes increasingly important, with an estimated market value of 12-20 billion yuan (1.81-3.03 billion U.S. dollars), says the report.

Photo/VCG

Other energy and emission intensive industries will be gradually included

The power generation industry was chosen as the first sector to implement the carbon trading system as it has the most complete data on emissions among all industries, said Li Gao, the head of the climate change office at the National Development and Reform Commission.

Li added that enterprises whose annual carbon emissions surpass 26,000 tonnes of carbon dioxide equivalence will be included into the scheme and more than 1,700 power generation enterprises with a total emission of over 30 billion tonnes will be involved in carbon trading. This makes it the biggest carbon market in the world, note Li.

According to Li, the threshold for carbon trading may be reduced further so as to bring more enterprises into the scheme. Other industries of high energy consumption and emissions will be included once they become well prepared.

Jiang Zhaoli, deputy director of the climate change office at the National Development and Reform Commission, said that the carbon trading will have a far-reaching impact on enterprises' internal management, decision making and investment.

Jiang explained that companies which stands above the baseline set by the scheme can obtain quotas through production. The more they produce, the more quotas they get and the leftover quotas can be traded in exchange of profits, Jiang added.

Email: gaohan@nbd.com.cn