Carbon dilemma that China faces
The World Bank estimates that carbon trading globally could be worth US$3.5 trillion by 2020, meaning it would overtake oil to become the world’s largest market. Spurred by this rosy outlook, China had 100 carbon exchanges in operation or under preparation by late 2011. Most were quickly taken over by speculators, however, while genuine carbon trading remained rare. None of the three main exchanges saw a single real carbon trade in its first year of operation.
On 29 October last year, the National Reform and Development Commission (NRDC), China’s top economic planner, announced that carbon trading trials would run in seven of the country’s most important cities and provinces: Beijing, Tianjin, Shanghai, Chongqing, Guangdong, Hubei and Shenzhen. Each of these locations already has its own carbon emissions exchange. (Compared with the existing exchanges, these trial platforms will enjoy policy-created-demand jaw crusher and guaranteed customers, and so in theory be free from worry about their sales performance.)
But as part of a clampdown on price manipulation and dubious trading practices, on November 11 last year the State Council – China’s highest administrative organ – announced a ban on trading in shares of assets except from stocks and permitted financial products, effectively blacklisting the core business of carbon markets.
The two almost parallel announcements highlight the government’s lack of coordination on carbon-markets policy. As there is no physical commodity, carbon emission allowances are always traded as shares. The State Council proclamation was in clear conflict with the fortnight-old NDRC document. But, in February, state news agency Xinhua reported in a local news that “The Shanghai United Assets and Equity Exchange has been designated by the NDRC as an environment and energy trading platform,” indicating that the threat posed by the policy restrictions of the State Council document had been overcome.
But those licensing issues are nothing compared to the real problem facing carbon markets: how to make tradable emissions permits appropriately scarce. The 2007 crash in the EU-ETS market was caused by a glut of allocated emission rights, far exceeding demand. There was next to no scarcity. flotation cells：http://www.hx-china.com/16.html
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In 2008, the European Union knocked back proposals from member states for lax emissions caps during the scheme’s second phase (2008-2012) and ultimately agreed on an average cut of 7% below 2005 levels. But the European debt crisis has dealt a heavy flotation machine blow to the carbon price, as well as the wider economy: demand is again much lower than anticipated, and this has impacted investment in low-carbon technology. The EU, with its sluggish economy, has repeatedly failed to accurately predict future emissions, demonstrating how hard it will be for China to set similar targets.
The international media, however, has been less interested in the challenges facing China’s seven carbon-trading trials than in what their existence might imply about Chinese climate policy. These pilots are meant to “calculate and cap total greenhouse gas emissions”, and have been widely interpreted as a prelude to China setting a national emissions cap, something that would be of huge significance.
This interpretation is both right and wrong.
The Chinese government’s 12th Five-Year Plan includes targets for energy-intensity and carbon-intensity cuts of 16% and 17% respectively between 2010 and 2015. In December last year, the State Council formally set reduction targets for provincial-level governments. But in the second half of 2011, the National Energy Administration also started looking at capping total energy consumption. And it’s a short step from energy consumption to carbon emissions. Currently, the total primary energy consumption cap for 2015 has been set between 4 billion and 4.2 billion tonnes of coal equivalent, while there is also a total electricity consumption target of 6.4 trillion kilowatt hours.
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