In a move to improve its pollution heavy environment, China launched its first pilot carbon market on June 18. The market, operating in the southern Chinese city of Shenzhen, Guangdong, home to over 3.5 million residents and a heavily manufacturing focused industry, allows companies to buy permits to emit carbon dioxide from those that burn less fossil fuels.
The Shenzhen pilot market has drawn the inclusion of 635 local companies, accounting for a significant share of the city’s GDP (26%) and, crucially, 38 % of the city’s CO2. Participating companies are allotted permits for total emissions of 100m tons between 2013 and 2015. In light of these limits, the Shenzhen companies aim to reduce their carbon intensity by almost 7 % by 2015.
The trading scheme was launched during the same week as the World Alliance for Low Carbon Cities held its latest Low-Carbon City Development World Forum in Shenzhen. The launch of the carbon market drew local and national policy makers eager to track the progress of the first pilot in a program which will include a total of seven regional trading platforms once it has finished rolling out over the course of the next two years. Ultimately these pilot networks will serve as preparation for the launch of China’s national carbon trading market in 2015, providing useful experience and guidance in the formation and operation of an effective trading scheme.