This article first appeared in Bloomberg News.
China’s top economic planning agency, the National Development and Reform Commission, submitted a plan to the State Council to start a carbon-trading system nationwide, people familiar with the matter said.
The plan needs approval from the council, China’s cabinet, the people said, asking not to be identified because they aren’t authorized to speak publicly. The plan could be announced as early as next week at the start of climate talks in Bonn, the people said.
China, the world’s biggest carbon emitter, pledged in 2015 to start a carbon market this year to help it cap emissions by about 2030. The nation is also making big bets on clean-energy projects in an effort to derive 20 percent of its energy from sources other than fossil fuels by that year.
It’s not clear when carbon credits could actually begin trading in a national market, according to the people. NDRC didn’t immediately reply to a fax seeking comment.
Sophie Lu, head of China research at Bloomberg New Energy Finance, said it’s not surprising the nation will start the system soon. “More importantly, we need to focus on what companies will be included,” Lu said.
The system will adopt a cap-and-trade rule in which the biggest corporate polluters buy credits from those that don’t emit as much, and companies are encouraged to cut their emissions so they can sell unused allocations.
The world’s most populous nation began running pilot systems in seven regions starting in 2013 to guide the shape of the national system. Transaction value totaled 4.5 billion yuan ($679 million) in the pilot markets as of September, Li Gao, an official of the climate-change department at the National Development and Reform Commission, said at a briefing in Beijing on Tuesday.
“Based on experience from pilot schemes, there isn’t a lot of proactive trading” among companies, Lu said, adding that trades may often occur at the end of a deadline when companies have to settle their carbon-quota allocations.
China is seeking to avoid excessive speculation in a carbon trading system, NDRC’s Li said, without elaborating on details of steps the nation will take. The carbon market will be developed in a way that “makes progress while ensuring stability,” Li said, adding that “we are confident in completing relevant work for building a carbon market” as planned.