China to set up a carbon-credit exchange in Beijing

By Kirtiman Awasthi
Published: Thursday 15 March 2007

china is set to establish the developing world's first carbon-credit exchange in Beijing later this year. The move is part of the Chinese government's new programme, 'carbon finance project', launched on February 6, 2007, in collaboration with the undp.

Once established, the exchange will compete with carbon exchanges in the European Union (eu) and the us, which are currently the only centres for the us $22-billion global trading market for carbon credits. "Assisting China in its efforts to cope with the impact of global climate change to create more sustainable, less greenhouse-gas-intensive development paths is an important focus," said Khalid Malik, the un's representative in China.

Apart from pilot carbon trading, the three-year, us $1.7-million programme will look into capacity-building and providing policy inputs for the expansion of the carbon market and reduction of greenhouse gas emissions in China. To achieve this, the programme will set up clean development mechanism (cdm) technical service centres in 12 selected provinces in western China, including Hubei, Inner Mongolia, Jilin, Qinghai and Xinjiang.

Carbon credits are issued by the un through cdm under the Kyoto Protocol. They can be traded on special exchanges, through brokers or between companies. Companies in industrial countries that have signed the Kyoto accord to limit their greenhouse gas emissions can buy credits in registered projects, such as those for renewable energy, in developing countries. The credits can then be used to offset Kyoto obligations in the home country.

According to a World Bank report, Chinese industries sold 60 per cent of carbon credits in the us $2.3-billion cdm market in the first three quarters of 2006. Earlier, it supplied about a third of the credits to the global carbon market under cdm.

However, the majority of its cdm projects focus on reducing emission, with little use of clean technology. Being the world's largest user and producer of coal, the country is unlikely to meet its ambitious energy saving targets by 2010. Chinese experts thus believe that Beijing's move will help the country to attract large foreign investment in green technologies.

"A range of market-based instruments have now emerged to support this effort, with carbon trading emerging as a major opportunity," said Khalid. With the establishment of the China exchange, the trend is expected to flourish further.

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