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How China Plans to Cut Carbon Pollution through Market-Based Measures

China just launched the world’s second largest carbon emissions trading program – collectively, seven emissions trading pilots are expected to cover 700 million tons of CO2-equivalent by 2014. Shenzhen, a major city in the southern province of Guangdong, was the first of the seven emissions trading pilots to begin trading on June 17, 2013 covering 600 industrial enterprises that account for 40 percent of total emissions in Shenzhen. The program is projected to cut carbon emissions per unit of GDP by 21 percent by 2015, compared to 2010 output. This will exceed China’s national goal of reducing carbon emissions per unit of GDP by 17 percent, according to China’s 12th Five Year Plan.

Following this, Hubei, Beijing, Shanghai, Guangdong, Tianjin, and Chongqing are scheduled to launch their respective emissions trading pilots. Each of the emissions trading scheme (ETS) pilots are designed and implemented by the respective regional provincial or municipal development reform commission, with the exception of Guangdong’s which is being led by the Guangzhou Environmental and Energy Institute.

Urbanization in Hubei – solar panels atop roofs

Provincial Leadership

The experience gained from the pilots, although in their initial stages, will be instrumental to informing China’s national ETS strategy. The pilot ETS regions vary by GDP, sectoral emphasis, population and carbon intensity amongst other characteristics. This phase is an opportunity for governments to trial the market mechanism, determine underlying costs of mitigation abatement, uncover the inefficiencies in energy consumption, and the gains to participating in an ETS – all of which will be advantageous for long-term low carbon development planning and can produce a uniform system to monitor, report and verify e