China has proposed plans for its seventh carbon cap-and-trade program. This month, Guangdong province joined six other cities and provinces in forming pilot programs to reduce carbon emissions in energy intensive industries. Guangdong’s participation is significant because the large southern province is a national industrial powerhouse for China and includes the economic miracle city, Shezhen.
The pilot program is voluntary, but four cement companies have already formally signed on. TaPai Group, HaiLuo Cement, ZhongCai Cement, and HuaRun Cement have joined together in a 1,300,000 ton carbon dioxide cap. The companies all intend to add new production lines and establish carbon emissions targets. A representative from ZhongCai Cement pointed out that, although there will be increased production expenses for meeting emissions targets, the company will benefit from raising the bar for the whole industry’s energy efficiency. A permanent emissions trading program would create a barrier to entry for new or smaller cement companies.
Coming towards the second half of its 12th five year plan (2011-2015), China’s pilot carbon emissions trading programs focus on bringing communications, transportation, and construction industries under cap-and-trade limits. One of the hurdles for any new carbon exchange program is a lack of historical data. The Guangdong’s pilot program includes mostly factories that are not accustomed to monitoring emissions and so do not have years of data to base a market price for carbon credits on. Currently, 90% of the companies participate in the program for free, while 10% pay according to an international market price. Other questions remain as to what penalties will be in place for companies that fail to meet their carbon quota and what role will the government play in the carbon trading system. In any case Guangdong faces the huge challenge of attempting emissions reductions while encouraging increases in industrial and economic growth. China intends to have a national carbon exchange program in place by 2016. How the relatively wealthy Guangdong province decides to carry out its carbon exchange program will mean a lot to other provinces making similar decisions.
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Written for SIEL by:
Althea Mickiewicz, 1L