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Domestic Carbon Market Development in China

Chen Huan
China CDM Fund Session 11, Manila June 23, 2011

National emission control objectives

November 2009, climate change mitigation objectives by

CO2/GDP reduction by 4045% by 2020 compared with the 2005 level; Increase ratio of Non-fossil energies to 15% by 2020 in the energy mix; resolute determination and great ambition of the Government of China;

need very hard work and great efforts to achieve.

March 2011, 12th Five-Year Plan period (2011-2015)

CO2/GDP reduction by 17% from 2011 to 2015, first of its kind in national

five-year plans; energy consumption/GDP reduction by 16% from 2011 to 2015, based on 19.8% reduction achieved from 2006-2010. Increase ratio of Non-fossil energies to 11.4% by 2015 in the energy mix All are binding targets; Which has been broken down to sub-targets for provinces.


Domestic carbon market policy

August 2009, Minister XIE Zhenhua remarked
Pilot carbon trading in certain regions and certain sectors
When report to National Congress Steering Committee

March 2011, 12th Five-Year Plan

establish GHGs emissions trading system gradually;
establish statistical and verification systems for GHG emissions. Which means carbon market will be key policy instrument for China to

control GHG emissions, in addition to command-control measures In order to achieve 40-45% objective by 2020.

April 2011, domestic mandatory cap-and-trade market

announced by climate change official from NDRC; 2013, pilot carbon markets in 4 municipalities and 2 provinces: Beijing,

Shanghai, Tianjin, Chongqing, Guangdong and Hubei. Unlinked with each other; 2015, domestic carbon market nationally unified. CDMFUND

Domestic carbon market preparation: top-down

August 2010, low carbon pilot projects in 5 provinces and 8 cities
implementing accountability of local governments to control GHG

emissions; exploring effective policies combining government guidance and economic incentives; and studying feasibility of carbon market.

Soon, government-approved domestic voluntary emission reductions

(carbon offset credit) trading

Including and beyond CDM; A national registry will be established. Trading through qualified carbon exchange platforms is mandatory.

International cooperation
Carbon market capacity building and infrastructures establishment Multilateral: world bank, ADB World Bank launched partnership for Market Readiness

Bilateral: EU and its member countries, Norway, Japan, etc.


Domestic carbon market preparation: bottom-up

Voluntary emission reductions trading with foreign buyers
Project by project, like CDM Giving change to projects that can not be approved as CDM Introducing methodologies and approval procedures other than CDM,

such as Gold Standard, Voluntary Carbon Standard, Voluntary Offset standard

From 2008, trading platforms established one by one

More than 20 till now

Most famous three: Shanghai Energy and Environment Exchange, Beijing

Environment Exchange, Tianjin Emission Allowance Exchange Enterprise behavior, instead of governmental behavior till now, mainly domestic voluntary trading, and total volumes are small Lobbying and supporting government to establish cap-and-trade ETS.

Researches by NGOs, academies, and agencies with governmental



Domestic carbon market preparation: bottom-up

Contribution to carbon market infrastructure construction
Infrastructures: MRV, registry, trading platforms, etc. e.g. China Standardization and Technical Consortium for Energy

Conservation and Emission Reduction (STCE, ) Which is non-governmental and non-profitable About 400 members, from academies, institutions, industrial associations, enterprises, consultancies, etc. One of its missions is to establish domestic emission MRV standards linkable with international ones.

China CDM Fund is a key and active member of the Consortium

Enterprises internal carbon accounting, carbon neutral

enterprise social responsibility, green competitiveness, reputation, etc.

Petro-China, Sino-Pec, etc


China CDM Funds efforts for domestic carbon market

Briefing China CDM Fund
Established in November 2007; Integrates government and market functions; mandate: to support China activities addressing Climate Change so as to

promote its sustainable development; funding mainly from government-sharing of China CDM revenue.

Roles of the Fund for China Addressing Climate Change A pilot money: to set up market-driven mechanisms for energy
conservation and emission reduction in China; A seed money: to leverage private resources; An platform: for international and domestic cooperation; and A promoter: to help Chinese enterprises build up energy and carbon asset management capacity.


China CDM Funds efforts for domestic carbon market

The Fund sponsors research of carbon market and outreach
Project-level Emission Reduction MRV Guideline

will accepted by China Standardization and Technical Consortium for Energy Conservation and Emission Reduction

Emission MRV standards in such sectors as iron&steel, cement, building Emission trading mechanism research, e.g. power sector. Policy suggestions to the Government of China through the Ministry of


All projects invested by the Fund must achieve energy saving and

GHGs reduction
The Fund help project-owners to identify and manage carbon assets


Chen Huan Deputy Director General Tel: +86-10-88659333 Web: