The National Development and Reform Commission (NDRC) announced the official launch of China’s carbon-trading scheme in a teleconference on Dec. 19. The scheme defines the trading participants as high energy consumption, high pollution, and resource industries, and will start with the power sector by building a pilot market within two years.
“The power-generation industry is in the most favorable position [for the scheme] right now, with the most complete data and a relatively large scale of carbon emissions. The market will initially cover about 1,700 coal- and natural gas-based power-generating companies, accounting for about 3 billion tons of carbon dioxide emissions per year – more than a third of the country’s total.” Zhang Yong, a vice-chairman at the commission, said.
Under the cap-and-trade scheme, companies are assigned a maximum amount of emissions that they can produce and will have to purchase “carbon credits” for anything exceeding that. But emission trading is not meant to be a punitive system: companies that emit less than their yearly allowance can sell their carbon credits on the market and make a profit, which provides an incentive to clean up their production chain.