China Adds Another Tool to Curb Pollution, Launching First Cap and Trade Program

China launched its first cap and trade program to reduce carbon pollution today, a landmark advance toward fighting climate change. As the world’s largest source of carbon dioxide, China is a notable new player joining California and eight other countries and jurisdictions around the world with such programs.

China produces one quarter of the world’s carbon pollution, and today’s launch is just the first of seven pilot cap and trade programs that by 2015 will cover 7 percent of the country’s total emissions –which is more than what Germany emits each year according to the World Bank. Under a cap and trade program, polluters buy or sell (trade) permits that allow them to produce a steadily declining amount of emissions (cap).

Addressing Climate Change Through Comprehensive Efforts

In both California and China, the cap and trade program is just one element of a much more comprehensive effort to reduce pollution. For example, like California, China requires its utilities to help customers use energy more efficiently. Both also have ambitious targets to increase generation from renewable resources. And China has pledged to adopt more stringent fuel standards to slash air pollutants and is piloting efforts to reduce reliance on coal-fired electricity.

On Friday, China’s cabinet adopted 10 measures to improve air quality, including a mandate that large polluters like coal-fired power plants publicly release detailed environmental information.  Another breakthrough is the recent agreement between China and the United States to work together on phasing down the production and consumption of hydrofluorocarbons (HFCs), potent greenhouse gases used in refrigerators, air conditioners, and industrial applications.

China’s Plan for Expanding Cap and Trade

Seven different cities and regions across China including Beijing, Shanghai, Shenzhen, Tianjin, Chongqing, Guangdong and Hubei have pilot cap-and-trade programs in development. These cities and provinces represent a range of different industries, so each program will be tailored to local characteristics with different reduction targets. Today, the city of Shenzhen’s launch will limit carbon emissions from more than 630 industrial companies, with a target to reduce the city’s overall carbon consumption by 21 percent by 2015. Shenzhen will be joined over the next year by the six remaining programs and if all goes well, China aims to have a nationwide system in place by 2016. 

Governor Brown and Ministry of Commerce Sign Trade Agreement in April 2013 (Image credit:CA.Gov)

Moving Forward Together

Mary Nichols, chairman of the state’s Air Resources Board that oversees California’s comprehensive climate change program, is in Shenzhen for the program’s inauguration. Nichols and Director of the Shenzhen Development and Reform Commission Xu Anliang signed a memorandum of understanding to work together on carbon mitigation efforts, including cap and trade and low carbon technology exchange. Under the agreement, California and China will share best practices on program design components such as emissions data measurement and verification, market monitoring, compliance and enforcement, which are critical elements to the success of cap and trade.  

The agreement builds on recent efforts to increase cooperation between China and the Golden State. On a trip to China in April, California Governor Jerry Brown signed agreements with China's Ministry of Environmental Protection to strengthen and coordinate strategies to improve air quality, and with China's Ministry of Commerce and six Chinese provinces and regions to expand trade and investment, particularly in the sectors of new energy, environmental protection and infrastructure.

The Time For Action

China’s adoption of cap and trade is a milestone in the development of global climate solutions, and the growing country has good reasons to act now. The notoriously poor air quality in Chinese cities again drew international attention earlier this year, when Beijing’s severe smog lingered for days, threatening the health of residents. China’s launch of cap and trade adds another important tool for the world’s largest source of carbon dioxide to reign in emissions, and the exchange of experiences and lessons learned between China and California can help ensure the programs are successful.

Mary Nichols offered her congratulations and support to the city of Shenzhen at the program’s launching ceremony, saying “the actions of states, provinces, and cities are creating a foundation that national and international action can spring from. We are blazing the trail…We look forward to continuing to work with you, to learn together by doing – and to show the rest of the world how fighting climate change can be done.”