China Moves Toward Carbon Emissions Trading to Improve Energy Efficiency and Competitiveness - NYTimes.com

China Moves Toward Carbon Emissions Trading to Improve Energy Efficiency and Competitiveness - NYTimes.com

SHANGHAI -- When professor Chen Hongbo tried to promote carbon trading in China three years ago, he found himself under fire. As developing countries like China aren't obliged to limit the byproduct of their economic growth, opponents argued vehemently that they saw no need to motivate Chinese industries to either emit less greenhouse gases or pay for their emissions.

Today, China is still free of that obligation, but the internal dispute seems to have ended. In its proposed development plan for the next five years, the government has for the first time revealed its interest in building a domestic carbon market.

"Everybody now agrees this is a must," said Chen, an associate professor at the Chinese Academy of Social Sciences, a key government think tank in Beijing.

What silenced the dispute, according to Chen, was the recognition that carbon trading not only tightens a valve on China's greenhouse gas emissions, but also goes hand in hand with another primary concern -- energy efficiency.

To make local businesses more competitive and ensure national energy security, the Chinese government has been scrambling for ways to reduce the country's energy use. But its previous attempts -- such as simply shutting down inefficient factories -- cost jobs and couldn't be scaled up.

Carbon trading, however, may serve the mission better. In a nation where nearly 70 percent of the power supply comes from coal, a high carbon-emitting fuel, putting a price on carbon could drive businesses to use energy more wisely.

For now, China's only way to engage in carbon trading is through the United Nations' Clean Development Mechanism (CDM), a carbon emission credit system under the Kyoto Protocol. But with the clock ticking toward the expiration of the protocol in 2012, Chinese leaders appear to feel a greater urgency about building an alternative scheme at home in China.