China will test a provincial emissions trading system next year with the help from the Asian Development Bank (ADB), paving the way for a national scheme and lower greenhouse gas emissions in the country.
The ADB is providing a US$750,000 equivalent grant to lay the groundwork for a cap-and-trade emission trading system (ETS) in Tianjin municipal area and help to design the platform including the trading rules and regulatory framework as well as supporting the commissioning of the trading platform.
Cap-and-trade based emission schemes allow market participants to turn emission savings into a tradeable commodity and provide market-based incentives for industries to reduce their use of carbon-emitting fossil fuels.
“Emission trading encourages companies to increase energy efficiency and renewable energy supply, which would ultimately result in reduced greenhouse gas emissions. This pilot will provide valuable lessons for the design of a nationwide system to reduce the carbon intensity of the Chinese economy,” says Pradeep Perera, Senior Energy Specialist in ADB’s East Asia Department.
The ADB’s assistance includes a US$200,000 grant from its Technical Assistance Special Fund as well as a US$550,000 grant from the Climate Change Fund.
China is the world’s largest carbon emitter, but it has been making major strides in recent years to improve energy efficiency and to increase the use of renewable power sources.
Under The Government has set significant carbon and energy intensity reduction targets in its new five-year national development plan being implemented between now and 2015. It is also looking at developing market platforms that can provide companies with economic incentives to cut emissions.
In addition to the project in Tianjin, the government has also earmarked similar pilot emission trading schemes in Beijing, Shanghai, Chongqing municipalities, and in Guangdong and Hubei provinces.
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