China plans $65bn carbon market – at around $18/tonne

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Just two months after Australia trashed its carbon price because it was “too high” and would “trash the economy”, China has flagged that its planned carbon trading scheme will cover 40 per cent of its economy and be worth up to $65 billion.

The National Development and Reform Commission (NDRC), China’s top economic planner, this week outlined its initial plans for a nationwide market to slow down the rapid growth of greenhouse gas emissions in China.

The NRDC said it is likely to regulate 3 to 4 billion tonnes of carbon dioxide (nearly 8 times Australia’s entire annual emissions) by 2020 and the market will be worth up to 400 billion yuan ($65 billion).

This would make the market twice as big as the EU market, which is currently the world’s biggest. China plans to start a national market in 2016.

Dr Frank Jotzo, from ANU’s Climate Change Institute, and an expert on carbon markets, said the scheme as outlined by NRDC officials suggests a carbon price of around $18 a tonne, compared to Australia fixed price of around d $25/tonne and the EU price of around $10/tonne.

“It’s no surprise that there will be a national emissions trading scheme in China,” Jotzo told RenewEconomy. “What did come as a surprise was the announcement that the plan is for a 2016 start, when most experts were expecting a start closer to 2020.

“It is notable to that the NDRC are putting forward a price expectation for the scheme. With a predicted “value” of up to 400 billion yuan by 2020 and coverage of three to four billion tonnes of carbon dioxide, the implicit price expectation put forward by the NDRC is in the region of 100 yuan or $18 per tonne. This is higher than any of the major current emissions trading schemes in the world.”

Jotzo says that the Chinese government is sending a signal that it is serious about further strengthening domestic climate change policy.

This, he said, should be seen in the context of the upcoming climate talks, where all countries are expected to put post-2020 targets on the table early next year.

“It is a fair bet that China will be a force to drive stronger global climate action,” he said.

“This will require much more than just introducing an ETS. To make carbon pricing work properly, China will need market reform in its energy sector: liberalising prices, and giving state owned enterprises incentives to make decisions more on the basis if expected profits.”

Reuters reported that the NDRC plans will cover around 40 per cent of China’s total emissions, according to a presentation delivered by Jiang Zhaoli, director of domestic policy and compliance in the NDRC climate change department.

The NDRC expects the emission permit futures market to be worth 60-400 billion yuan ($10-$65 billion) annually by 2020, with a smaller spot market with a value of around 1-8 billion yuan, according to the presentation seen by Reuters.

Reuters said that Jiang’s presentation was based on China removing a ban on futures trading in carbon permits, something experts have said is necessary to make the market work.

Reuters said:

The scheme as outlined would regulate around twice as many tonnes of CO2 as are currently included in the European Union emissions market and could double the value of the global market.

Jiang said China would bring in even more emitting sectors after 2020 and would also seek ties to international markets in the next decade, but the presentation gave no further details.

It showed that Beijing plans to let central government decide the amount of permits that will be handed out to companies, create and operate the permit registry and set the rules for how emissions are monitored, reported and verified.

Since last June, China has launched seven regional pilot carbon markets in a bid to gain some experience before the national scheme begins.


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  • Tony Pfitzner

    “The best argument against democracy is a five-minute conversation with the average voter.” – Winston Churchill

    Our democracy has delivered Tony Abbott and no climate action.

    The Chinese authoritarian regime will deliver effective climate action.


    • michael

      your point?

      • anthony

        Not hard to figure out.

        He is pointing out the irony of an authoritarian regime actually making better choices for society than the average voter (ie Abbott’s election) re climate action.

        • michael

          Linking the move against pollution (arguably more about particulates and maintaining an accepting populace of the status quo) to negative comment about democracy was a long bow I thought

  • Jo

    Am I the only one who remembers when Greg Hunt gave us a guaranty that China will NOT have a carbon trading scheme?
    What is the consequence from that guaranty? Will he step down?

    • John Pollock6

      When did Young Greg care about reality? He thinks what he is told to think.

  • Alex Rogers

    No Jo, you are not. From his speech to the Carbon Expo in Nov 2012: “The largest individual emitters in the world, China, India and the United States, are not about to adopt a carbon tax or equivalent system…A few micro carbon trading schemes which may only tax the lightest portion of emissions means little in the face of the greatest rise in coal consumption in history.” Any comment, Mr Minister?

  • juxx0r

    If the Chinese spend the revenue on building wind/solar/hydro/geothermal/wave/tidal etc. then they will win. If they let banks play around with the proceeds then what’s the point.

  • michael

    will this scheme actually substantially cut chinese emissions over the next 20 years which will be major contributor to the global carbon budget? or is it a nice story. Without outcomes, that is predictions of how much carbon this will avoid entering the atmosphere, it is meaningless. It says how much it will regulate, not how much it is predicted to reduce.

    • Bob_Wallace

      Obviously no one can accurately foresee the future. What we have to do is to look at what has happened and what is happening and make our best guess.

      If you look at what China has been doing in recent years you will see that they have said that they would install a large amount of wind generation. And then installed even more than what they predicted. The same for solar.

      China has installed more wind generation than any other country. China installed more PV solar in 2013 than the US has installed in total.

      China has built very efficient coal plants and closed thousands of inefficient coal plants. They’ve even banned new coal plants from some parts of their country.

      China has started a major roll out of electric vehicles and is build the charging infrastructure needed.

      My take is that China is serious about dealing with greenhouse gases and climate change. I’m basing that on what they are already doing.

    • Alen

      Regulating carbon and broadly GHGs through an ETS means finally accepting that this externality is causing a major problem and thus requires placing a price on this pollutant, then once this becomes well accepted knowledge it should be much easier in theory to tighten emission regulation and also lead to a general change in behaviour (about GHG). Also economically FFs have been preferred due to its cost advantage, a carbon price which may increase in the future should make longterm investors a bit more wary and this on top of fluctuating fuel prices should make RE that much more attractive, or in general it makes less polluting technologies more attractive than often cheaper upfront higher pollution technologies, but again most importantly it sends a message that this externality should no longer be ignored.

  • Rob G

    Anyone seen big Clive? He’s all for an ETS once big emitters set the price, seems we’ve got one now so how about we follow suit and start charging our big polluters (again!) Clive? Where are you?

    • Alen

      Well following Clive’s theories and predictions, Australia doesn’t have to bother implementing an ETS, we just have to wait for China to invade and take over Australia and then for it to expand its own national ETS to include its new colony (formally known as Australia).

      But honestly I have little faith in Clive, but what I am grateful for is that he is promoting the idea that if other countries take serious climate action and Australia continues to go backwards on climate change, the prospect of sanctions against us will become a growing reality. People have continually argued that in economic terms climate action is high, it’s about time people realise that climate inaction will result in even higher economic costs and they will come from range of sides.

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