China has actively pursued policies to reduce greenhouse gas emissions and promote renewable energy, driven by energy security and economic growth. The establishment of pilot emissions trading schemes is expected to lead to a nationwide system by 2015-2016, making it the world's second-largest carbon trading endeavor. These initiatives, alongside China's substantial investments in clean technology and renewable energy, position the country as a future leader in climate action.

1. The
Climate
Institute
Climate Action in China
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2. Climate Action in China
October 2012
“China in the last five years has very consciously moved to slow the rate of its
greenhouse gas emission growth by curbing its energy intensity, becoming a
world leader in renewable energy, and most recently establishing carbon trading
systems in its largest provinces. These actions are driven by self-interest, not
only regarding concern for climate impacts, but for strengthening energy security,
developing a low carbon economy with export opportunities and showing
international leadership.”
John Connor, CEO of The Climate Institute
This presentation provides a summary of the Climate Bridge report Carbon Markets and Climate Policy in China: China’s
pursuit of a clean energy future. Climate Bridge is an international carbon project developer with a portfolio of more than
180 emission reduction projects which has been active in the carbon market in China since 2006.
Cover image: Michael Hall
All others courtesy of Climate Bridge
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3. Key Points
• For self-interested reasons, China has moved to slow the growth rate of its greenhouse
emissions. China has already reduced its energy intensity, become a world leader in renewable
energy, and is rapidly establishing carbon trading systems. These actions not only have positive
impact on the climate, they also drive economic growth, reduce fuel dependency and create
export opportunities.
• China’s main exposure to the carbon market has been through the Kyoto Protocol’s Clean
Development Mechanism (CDM). This positive experience with carbon markets has built
capabilities in carbon measurement and auditing and contributed to China choosing to establish its
own domestic carbon trading scheme.
• China’s ambitious emissions trading pilot schemes collectively represent the world’s second
largest emission trading scheme and are expected to lead to a nationwide system in 2015-2016.
• China’s scheme dovetails with other global schemes, paving the way for a global climate change
agreement coming into force in 2020.
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4. China’s Recent Climate Policy
China’s proactive climate change policy has been driven by high-level, often self-
interested motivations.
Motivations for action:
• Strengthening energy security by reducing
dependency on foreign fossil fuels
• Developing the low carbon economy, growing
related exports and creating jobs
• Avoiding dangerous climate change. China is
particularly vulnerable with 22% of the world’s
population and only 7% of its arable land.
• Showing international leadership and
strengthening international negotiating position
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5. China’s Recent Climate Policy
Historically, China’s climate policy has relied upon predominantly command-and-control
mechanisms.
Policies:
• 1000 enterprises programme – Starting in 2004,
targets were set for China’s largest polluting enterprises
(who account for 33% of China’s national energy use).
• Support for renewable energy – Since 2006, relatively
high feed-in tariffs for renewable energy have been in
place. Tax holidays and other fiscal incentives are
offered to developers.
• Restrictions on fossil fuel use – Since 2010, increased resource taxes have been set on
fossil fuels. In 2015 there will be a cap placed on coal production.
• Backing for strategic emerging new industries – The national Energy Agency has
established a development plan that requires direct investment of 5 Trillion RMB ($750BN) in
low-carbon projects.
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6. China’s Recent Climate Policy
Historically, China’s climate policy has relied upon predominantly command-and-control
mechanisms.
Achievements to date:
• China reduced energy intensity of GDP by 19% between 2005 and 2010. Energy efficiency
improvements in key industries were vital to achieving this target.
• 72.1GW worth of small, inefficient coal-fired power plants were closed from 2006-2010. That’s
more than the entire capacity of the Australian grid (~50GW).
• Renewable energy has had exponential growth over the last 5 years. From having virtually no
industry in 2005, China now has the largest installed capacity of wind power in the world and
is the world’s largest producer of solar modules. China also leads the world in hydropower
installations.
• China has become a major exporter of clean technology, selling to both developed and
developing countries. In solar energy alone, China exports $35.8 billion worth of products per
year, similar to the total value of shoes China exported ($39bn) in 2011.
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7. History of Carbon Markets in China
China’s main exposure to the carbon market has been through the Kyoto Protocol’s
Clean Development Mechanism (CDM). This positive experience with carbon markets
has contributed to China choosing to establish its own domestic carbon trading scheme.
• More than 2,000 of the 4,200 projects registered under the CDM are situated in China
• The CDM has driven spectacular growth in renewable energy. More than 40GW of wind power and
30GW of hydropower capacity have been registered under the Clean Development Mechanism,
which combined is larger than the entire Australian national grid.
• Emissions from highly potent industrial gases, such as HFC and N20, have been dramatically
reduced with CDM finance, representing emission reductions of millions of tonnes of carbon
dioxide.
• Other innovative technologies have also been supported by the CDM, including ground-breaking
coal mine methane, biogas and waste management technologies.
• China has established the administrative capability to review and approve carbon offset projects.
The Chinese authorities have developed essential tools for operating an emissions trading scheme.
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8. China’s Carbon Market Future
In December 2009, China set a target to reduce carbon intensity of its economy by 40-45%
by 2020, with one ambitious objective being the gradual establishment of a domestic a
carbon market.
• Pilot schemes will begin in seven of the
country’s most important cities and provinces
• Rules will differ between the pilot schemes to
allow China to experiment with different
emission trading scheme designs
• It is estimated that the programme will cover
approximately 700 million tonnes of CO2e
emissions
• There are likely to be price controls such as a
floor price in the pilot schemes
5 cities and 2 provinces have been • China is still considering a form of carbon tax, in
chosen to host pilot emission trading
schemes starting in 2013-14. addition to the emissions trading scheme.
Measured by emissions covered, China’s pilot emissions trading schemes will represent
the second largest carbon trading effort on Earth by 2014.
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9. China’s Carbon Market Future
Pilot Scheme Overview
Location Carbon Expected Emissions threshold Approx no. of Offsets accepted?
intensity Start Date for entry firms covered
target
Beijing 18% 2013 10,000 tonnes of CO2e 600 CCERs (issued by NDRC) set to
annually be allowed
Shanghai 19% 2013 10,000 tonnes of CO2e 200 CCERs, and a local offset
annually standard yet to be decided
Tianjin 19% 2013 10,000 tons of standard 120 Under consideration
coal equivalent
Chongqing 17% 2013 Six most energy-intensive Unknown Forest-based offsets may be
industries. eligible
Shenzhen Unknown 2013 Design still to be 800 Under consideration
determined. Five
alternative plans drafted
Guangdong 19.5% 2014 20,000 tonnes of CO2e ~820 Forestry offsets and CCERs
annually
Hubei 17% 2014 To include power stations ~100 CCERs likely to be accepted up to
and heavy industry 15% of cap
Australia (for N/A 2012: tax 25,000 tonnes of CO2e 315 UN registered CERs up to 12.5%
comparison) 2015: trading annually of total ETS coverage will be
accepted. No industrial gas credits
Source: Point Carbon
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10. The Global Perspective
The introduction of China’s scheme is in line with other efforts in the Asia-Pacific.
• China’s pilot schemes are scheduled to be
launched in 2013-14, with a nationwide ETS is
expected to emerge in 2015-16. Australia’s
emissions trading scheme will begin in 2015,
similar to China’s.
• South Korea have legislated for a nationwide
trading scheme in 2015, whilst Sao Paolo and
Rio De Janeiro will begin regional pilot schemes
in 2013.
• The United Nations framework on climate change (UNFCCC) process aims to finish negotiation
on a global agreement by 2015, which would come into force in 2020.
• China’s emissions trading system should eventually link with other schemes, though not until
after 2020.
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11. Global Climate Action Map
All major emitting countries are implementing policies to reduce emissions, drive clean
energy investment and improve energy efficiency.
The Climate Institute has launched a new,
interactive map to provide a top line summary of
national actions on climate change.
The map enables users to see what actions
countries have already taken, as well as those that
are under development. Users can look up and
compare up to three countries at a time, assessing
national actions ranging from emissions trading
and emissions standards to energy efficiency and
land sector policies.
Explore the map:
www.climateinstitute.org.au/global-climate-
action-map.html
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12. Global Climate Action Map
“This map very clearly shows that there is significant if as yet insufficient action on climate change and clean energy
policies around the world. Countries have chosen different paths, targeting different industries, depending on their
economic makeup and what they perceive as an opportunity for gaining a competitive edge in an increasingly global low
carbon economy.”
John Connor, CEO of The Climate Institute
www.climateinstitute.org.au/global-climate-action-map.html
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13. Conclusion
"Reducing emissions in China is critical to preventing global climate change, so it is extremely
encouraging to witness the Chinese authorities setting such ambitious renewable targets. Indeed,
China's pilot emissions trading schemes will cover twice the emissions of Australia's scheme in
2014. Business and politicians that assume inaction from China are taking a huge gamble on a high
carbon status quo."
Alex Wyatt, CEO of Climate Bridge
While China’s greenhouse emissions gases rose rapidly over the last decade, it has also been
implementing ambitious policies to slow the growth of these emissions with a 19.1% emissions
intensity reduction between 2005 and 2010. China has also been positioning itself to be a future
leader in clean technology, and is already the world’s largest producer of renewable energy.
The establishment of an emissions trading scheme in China should be viewed in the broader context
of developments in the Asia-Pacific and globally. China’s scheme aligns with other global schemes,
paving the way for a global climate change agreement coming into force in 2020.
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14. More information
Visit www.climateinstitute.org.au/global-climate-action-map.html
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