China launched its seventh and final pilot carbon market in Chongqing late last week, as the government looks to rein in carbon emissions and clear the air of pollution that is choking many Chinese cities.
China surpassed the United States as the world’s largest emitter of greenhouse gases in 2007. Since the early 2000s, China’s emissions have spiked, with the country releasing 9.9 billion tons of carbon dioxide into the atmosphere.
Over the past 10 months, China has rolled out pilot regional carbon markets as part of an effort to reduce carbon dioxide emissions per unit of GDP by 40 to 45 percent by the end of the decade from 2005 levels.
Just after the United States announced it new carbon pollution standards for existing power plants, China sent signals that it might ratchet up its own goal by instituting an absolute carbon cap that would not allow emissions to rise past a certain point.
China now has regional markets at the city level in Beijing, Tianjin, Shenzhen, Shanghai, and Chongqing, and at the regional level in Hubei and Guangdong provinces.
The Guangdong market—China’s largest—clocks in as the world’s second biggest carbon exchange. The Guangdong market caps carbon dioxide emissions from 242 of the province’s major polluters at 350 million tons per year.
The new market in Chongquing, meanwhile, has the distinction of being the first Chinese carbon market to cover greenhouse gases other than carbon dioxide. In addition to carbon dioxide, the new scheme will regulate five other greenhouse gases, including methane and nitrous oxide.
The Chongquing scheme will cap emissions of these gases from 242 polluters that have released at least 20,000 tons of carbon dioxide equivalent per year since 2008.
Xie Zhenhua, China’s top climate change official, was not present at the Chonquing opening, and some observers were skeptical of more than just the postponed launch ceremony.
Reuters reported that permits were over allocated for at least one firm—the Chongquing Iron and Steel Group—and that opening day trades were sparse. Only 16 deals were signed on the markets for the first day, covering 145,000 tons of permits.
Initial prices for the permits were approximately ¥30-¥31.5 ($4.83-$5.07) per ton. By way of comparison, permits in are currently trading at €5.75 ($7.84) per ton in the European Union and $11.92 per ton in the US state of California.
The completed roll out of the seven pilot markets is nonetheless an important step toward the establishment of a nationwide carbon market. Sun Chihua, a senior climate official at the National Development and Reform Commission (NDRC) recently said that the government intends to launch a nationwide pilot carbon market by 2017, and to have it fully operational by 2020.
This echoes similar statements by NDRC official Wang Shu, who said at a recent World Bank conference that a nationwide scheme could be up and running by 2018.