Monday, November 24, 2008

Emissions Trading in China

The Wall Street Journal looks at China's attempt at carbon management through a cap and trade system.

Question: what is the actual difference between cap-and-trade and the ETS (in Europe).

China Expands Markets for Emissions Trading [Wall street Journal]

BEIJING -- After years of small-scale experiments in using so-called emissions trading to reduce pollution, China is taking steps to set up a nationwide system.

In recent months, three cities -- Shanghai, Beijing and Tianjin -- have begun creating emissions exchanges modeled after a system pioneered in the U.S. to reduce emissions that caused acid rain.

Known as cap-and-trade, this system sets an overall limit, or cap, on how much an industry can pollute. Individual companies get permits, which can then be traded. A company that invests in cutting its emissions can, for instance, sell its credits to a company that operates less cleanly. Traders can speculate on the future value of the credits. When more production means more pollution, the permits gain value.

A similar approach is being used with the carbon markets in Europe, where national limits on greenhouse gases have been set and companies can trade credits that have been approved through the United Nations's Kyoto Protocol mechanism.

1 comment:

sallreen said...

The idea is to allow industries that emit greenhouse gases to buy and sell credits for their emissions. Businesses that cannot cut their emissions enough can buy the right to pollute from cleaner companies. Beijing will establish an exchange for trading carbon dioxide credits under a new program launched by the United Nations and the Chinese government to help counter global climate change.