China is planning the world's largest carbon trading market —and could take the global lead on climate

Living on Earth
China industrial pollution
On the streets of Ganjiaxiang, an industrial neighborhood in Qixia District, Nanjing

Vmenkov/Wikimedia Commons

A key senior Chinese official announced that the country will introduce a national carbon trading plan in 2016. If the trading program actually goes into operation, it will dwarf any similar efforts elsewhere in the world.

That is according to Barbara Finamore, the Natural Resources Defense Council’s Asia director. She says China is now responsible for roughly 30 percent of the world’s greenhouse gases. China's goal is to cut its “carbon intensity" — the amount of carbon emitted for each unit of GDP —nearly in half by 2020.

The national plan builds on pilot projects China is already running in seven provinces around the country, covering about 700 million tons of carbon emissions per year.

“The situation in each one of these provinces is different,” Finamore says. “China varies tremendously in terms of the level of economic development and the types of carbon emissions, amount of heavy industry and so forth.” So each pilot is different and is a test to see what will work best on a larger scale, Finamore explains. 

On September 23, the UN is holding a high-profile one-day climate summit among world leaders in New York. Some skeptics believe China’s announcement may be a bid for international approval rather than a serious commitment, but Finamore disagrees.

“I think, to a large extent, [the plan] is real,” she contends. “It will help China meet one of its goals, which is to increase its international image on climate issues ... but China has its own reasons for reducing its carbon emissions. One is the very strong level of vulnerability that China itself has to climate change.”

Finamore says Chinese scientists “foresee extremely grim impacts of climate change," which were noted in the second National Assessment Report on Climate Change in 2012. Among them, increasingly severe water shortages throughout the country, major reductions in grain output and heavy vulnerability to sea level rise. Much of China’s heavy industry is located along its long coastline.

China is also beginning to recognize the need to relieve the “choking levels of air pollution that are increasingly plaguing the country,” Finamore says.

China burns more coal than every other nation combined. They want energy security and view renewables as a potential economic engine. “China is now the largest investor in the world in renewable energy," Finamore notes. “It has the largest capacity for wind power in the world and it’s the largest manufacturer of solar panels — and it's increasingly deploying that solar energy domestically rather than just for export.”

If the national carbon trading plan successfully moves forward, it could expand into parts of Asia or even worldwide. Finamore points to a pilot project in Shenzhen, one of the first free-trade zones in China. Shenzhen is the only regional project to include large buildings, which are one of the fastest-growing sources of carbon emissions in China, according to Finamore. The project will allow carbon trading to happen in foreign currencies, which indicates to her that China will look to expand its trading program abroad.

But many questions remain. Because of China’s ongoing problems with “data transparency,” Finamore says, “we don't even know what carbon emission reduction has already been achieved by the seven pilot projects ... [W]e don't know what the targets were and how much progress they've been making towards achieving them.

Finamore says the International Energy Agency has calculated that “if China meets its voluntary commitment to reduce its carbon intensity by 40 to 45 percent by 2020, it will have made its contribution to the global effort to reduce global warming.”

That may displace the United States as the world’s leader in the fight against climate change. The US Environmental Protection Agency under President Obama proposed a rule earlier this summer that Finamore calls “the most ambitious effort in the United States to date to reduce its carbon emissions.” But, she stresses, it is still just a proposal.

Nevertheless, she says, when international negotiations begin, the level of ambition the United States and China are demonstrating is going to help show leadership to other countries. “I think these are very positive developments in both countries,” Finamore says.

This story is based on an interview that originally aired on PRI's Living On Earth with Steve Curwood