China’s carbon market ready – but waiting

Beijing: The world’s largest carbon market is ready and waiting on Chinese government approval, but may miss a goal of launching in 2017.

China’s special representative on climate change, Xie Zhenhua, said in Bonn that all preparations for the carbon market in China are ready and it has entered the “examination and approval process”.

“It will be launched as soon as possible after being approved,” he said.

Pilot schemes in seven provinces and cities had seen 197 million tons of carbon dioxide worth 4.5 billion Chinese yuan traded by September.

The market would play the decisive role in setting carbon prices under the national scheme but the government may also provide guidance, he said.

His update came as a global report forecast that China’s CO2 emissions would rise 3.5 per cent this year, after being flat in 2016, because coal fired electricity generation had risen in first nine months of 2017.

Greenpeace said on Tuesday that China’s thermal power use had since fallen for two months.

Greenpeace energy analyst Lauri Myllyvirta said it was a “significant signal” for China to create a national carbon market and it could become an important policy tool in the long term.

But short term, the carbon trading scheme would have limited impact because it is initially limited to the power sector where prices are regulated, he said.

Mr Myllyvirta said the 2017 growth in China’s emissions, highlighted in a report by the Global Carbon Project, was due to an “aggressive construction boom” by local governments trying to inflate GDP numbers “and shore up indebted smokestack industries”.

“We’ve been expecting this surge to abate as the central government clamps down on the real estate bubble and moves to contain the buildup of debt,” he said.

The latest monthly data from China shows thermal power generation falling 3 per cent, as solar leapt 36 per cent, hydro grew 17 per cent, wind generation grew 12 per cent, and nuclear grew 15 per cent.

China’s solar and wind generation are growing at “a very impressive pace”, he said.

“We think coal consumption has peaked structurally, but whether what we are seeing now is the surge turning back into a decline, or whether it will still take some time, is hard to say.”

From Wednesday, as part of China’s unprecedented campaign to reduce winter air pollution, the Beijing area implements factory closures which will affect 25 per cent of China’s steel making and 10 per cent of cement capacity. Such measures could speed up the turnaround in China’s emissions.

Another outlook report on Tuesday from the International Energy Agency said a cleaner and more diversified energy mix from China was driving a transformation of the global energy system.

The report said the “boom years of coal are over”.

The Chinese government’s strong emphasis on cleaner energy technologies, largely to improve air quality, is catapulting China to a position as world leader in wind, solar, nuclear and electric vehicles, the agency said.

Mr Myllyvirta said the IEA “make it clear that [China’s] coal consumption has already peaked structurally, and CO2 emissions are going to see either a long plateau or a peak and decline, depending on both the rate of growth of clean energy and the direction the economy takes – continued reliance on polluting heavy industry sectors or successful transformation to a more modern economy”.

In Bonn, Mr Xie said China was on track to meet its commitment to reach a peak in carbon emissions around 2030. There were 87 low carbon provinces and cities, 51 low carbon industrial parks and 400 low carbon communities in China which will peak sooner, he said.

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