China May Start Its First City-Wide Carbon Cap-and-Trade System
March 04, 2010, 5:22 PM ESTMarch 5 (Bloomberg) -- China may start its first city-wide carbon cap-and-trade system by June as the world’s biggest polluter seeks to rein in emissions, a project adviser said.
The northeast port city of Tianjin plans to impose a mandatory limit on energy used to heat buildings in the first half of this year, John Shi, chief executive officer of the carbon credit trader Arreon Carbon U.K. Ltd., said in an interview. Property managers able to reduce energy use to below the limit will earn credits they can then sell, he said.
“Pursuing energy efficiency has truly risen to the top of the agenda for local governments,” Shi said yesterday from his office in Beijing. The Tianjin plan is “a way to mobilize capital and mobilize technology.”
China has pledged to reduce its carbon-dioxide output per unit of gross domestic product by 40 percent to 45 percent by 2020 compared with 2005 levels. Premier Wen Jiabao in January called pollution in the nation “grim” and said the government will strictly limit emissions from coal-powered generators, cement and steel producers.
“The political environment last year wasn’t as ripe as it is this year,” Shi said, referring to the targets for emissions cuts announced in November.
The Chinese People’s Political Consultative Conference, the top advisory body to the nation’s parliament, this week proposed additional measures to cut carbon emissions. Premier Wen will today address the opening session of the parliament’s annual meeting in Beijing and deliver what amounts to China’s State of the Union speech.
Tianjin Program
The Tianjin program, China’s first market-based carbon trading scheme, was established by Arreon and the Tianjin Climate Exchange. The exchange is a venture between a unit of China National Petroleum Corp., the country’s largest oil and gas company, the Tianjin Property Rights Exchange and the Chicago Climate Exchange, according to its Web site.
“On the one hand, Tianjin needs to develop very quickly,” said Mu Lingling, deputy general manager of the Tianjin Climate Exchange. “On the other hand, it has to provide environmental protection.” The emissions trading program can help the nation achieve both targets, Mu said.
Representatives for the Tianjin government couldn’t immediately be reached on their office telephone numbers to comment on the plan.
Beijing and Shanghai are also working on carbon trading programs and are in a “horse race” with Tianjin to develop emissions trading systems for the nation, Shi said.
Arreon has been approached by local governments from the provinces of Inner Mongolia and Jiangsu and the cities of Dalian and Foshan for help in raising energy efficiency and reducing emissions, Shi said.
Pilot Trades
Tianjin, located about 120 kilometers (75 miles) southeast of the Chinese capital, recorded its pilot trades in carbon emissions allowances last month in a trial program covering heating suppliers serving more than 2 million square meters (21.5 million square feet) of residential buildings.
Citigroup Inc. and Russia’s OAO Gazprom bought energy- intensity credits from three heating utilities that had beaten efficiency targets in what Shi called “strongly brokered” deals. The energy savings were packaged as carbon-emissions allowances that could be sold to other utilities or to buildings in the city that can’t yet meet municipal goals.
The Tianjin program was designed along the principles of cap and trade methodology, the government’s five-year economic plans and third-party auditing of emissions, said Dan Barry, deputy director of global carbon at OAO Gazprom’s marketing and trading unit in London, which agreed to buy some allowances in the pilot phase.
“It’s a bit like the first phase of the European Union emissions trading system in that there will probably be an excess of allowances” as more buildings outperform the emissions-intensity target than overshoot, Barry said.
--With assistance from Regina Tan in Singapore and Mathew Carr in London. Editors: Randall Hackley, Nerys Avery, Mike Anderson.
To contact the reporter on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
