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Trading Carbon : December - January 2011
before the end of this year that would see a trading scheme start in 2015. Details on the system are scarce, but analysts predict it could cover about 1,200 installations or around 70 per cent of the country's GHG emissions. If the legislation is passed, 2012 is expected to see more details on the scheme developed. It is China, however, that provides the greatest potential for carbon trading in the future. The country has passed a plan to limit GHG emissions during 2011--2015, which includes piloting carbon trading in various regions of China. The plans are all aimed at cutting carbon intensity in the country 40--45 percent by 2020. Seven regions -- the provinces of Guangdong and Hubei and the cities of Shenzhen, Tianjin, Beijing, Chongqing and Shanghai -- have been chosen for pilot carbon markets. Guangdong, the country's biggest GHG emitting province, could launch a pilot ETS among the power and constr uction materials sectors possibly as soon as 2013. Other regions are also interested in being involved, according to Reuters reports on November 11. They include Jiangxi, Hunan, Shaanxi and the city of Dalian. The Outlook Weekly magazine, r un by the official Xinhua news agency, estimated in October that there were more than 100 entities across the country trying to establish carbon markets, Reuters reported. There are also other plans for emissions trading in Asia. Taiwan is working on a programme for domestic GHG emissions reduction. The three-stage development would culminate in cap-and-trade, as the country aims to return its emissions to 2005 levels by 2020. And an official from Thailand's Greenhouse Gas Management Organisation told Trading Carbon in June that the country is developing a voluntary domestic ETS. The scheme will be set up with the help of money from the World Bank's Partnership for Market Readiness. Colombia is another country benefitting from World Bank money and looking to establish emissions trading. The South American country is planning a scheme for transport emissions across several of its major cities. Elsewhere in South America, Chile and Brazil are also known to be studying the merits of carbon trading. In Central America, Costa Rica is in the process of establishing a domestic offset mechanism (see Trading Carbon, July/August 2011, pages 32--33). Carbon cap-and-trade may not be the panacea to solve climate change that it once was believed, but, as the programmes outlined above show, neither is it a tired idea that "has had its day". Many of the schemes may still be in the planning stage, yet others have r ules in place and set starting dates. An increasing portion of the world's GHG emissions will be capped under trading systems and carbon pricing will continue to play a role in dealing with global warming. l 29 CARBON EMISSIONS TRADING From 2015, unlimited credits can be used, as well as international credits, such as Certified Emissions Reductions (CERs) from the Clean Development Mechanism (CDM), up to 50 percent of a covered entity's obligation. CDM credits will have the same qualitative restrictions as the EU -- no industrial gas offsets -- but not geographic limits. An Australian cap-and-trade scheme will be the second such system in Australasia, with New Zealand having established an ETS in 2008. It covers about 16 Mt of CO2 in forestry, power generation, industry and transport sectors, although it has no specific cap -- participants get issued for free the units they need based on sector-specific efficiency criteria. For the time being, emitters only have to surrender permits for 50 per cent of their emissions, but this is set to be increased gradually to 100 per cent in 2015. The change would take covered emissions to 32 Mt. The carbon price is capped at NZ$25/t (US$20), which will remain in place at least until 2015. The scheme is also open to international carbon credits, such as CERs, Emission Reduction Units from Joint Implementation and UN Assigned Amount Units. Elsewhere in Asia-Pacific, Japan's capital Tokyo has had an ETS since April 2010. It covers 1,300 companies that consume energy equivalent to more than 1,500 kilolitres of crude oil per year. Firms covered need to cut their emissions 6--8 percent below a 2002--2008 average in the 2010--2014 period. This equates to about 900,000 to 1 Mt of CO2 emission cuts over the first five years of the scheme. Domestic offsets are admissible, but international credits are not. South Korea could approve cap-and-trade legislation Dec 2011/Jan 2012 It is China that provides the greatest potential for carbon trading in the future. Seven regions will have pilot schemes KIM KYUNG HOON/REUTERS