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China's National Carbon Cap and Trade Program

by gmoke Sat Dec 24th, 2016 at 06:16:15 PM EST

Notes from China's National Cap-and-Trade Program: The Promise and the Reality Wednesday, November 9
3:30PM TO 4:45PM
Harvard, 100F Pierce Hall, 29 Oxford Street, Cambridge

Wang Pu, Fellow at the Science, Technology, and Public Policy Program, Belfer Center for Science and International Affairs, HKS.

Co-sponsored by the China Project, SEAS, and the Environment and Natural Resources Program, HKS.

China Project Seminar Series

Contact Name:  Tiffany Chan tiffanychan@seas.harvard.edu


China started 7 different pilot programs with local administration of carbon trading in 2013, covering electricity and heavy industry but also including buildings in the Shenzhen pilot program.  The average carbon price was $4-5 per ton.  Problems included lack of consistency and transparency, weak legal enforcement, and lack of accurate emission data, but there was very high compliance, up to 98% participation by the entities covered.

The national program has no specified emission reduction goals, projections, or trajectory for carbon reduction.  It is a bottom up approach with the national cap to be based on the sum of facility data.  The national carbon trading administration identifies industry sectors and thresholds while the regions identify the covered facilities:  steel, electricity, petrochemical, cement, nonferrous metal, paper mills and aviation. Around 10,000 firms are included, covering 30-40% of national carbon emissions.  The allowance allocation is similarly two tiered with provincial authorities allocating allowances based upon the national allowances using a combination of benchmarking, grandfathering, and auctions.

State-owned enterprises control 50% of electricity capacity and much of heavy industry.  The electricity sector has generation quotas and prices set by the government so market mechanisms don't necessarily work.  Steel, cement and glass production are decreasing but becoming more efficient.  The electricity and petrochemical industries may buy up their allowances to create inequities and reduce emission effects.  Climate policy is thus being used to force manufacturing to upgrade technology and improve energy efficiency to reduce air pollution, a pressing political issue around the country.  (And one becoming increasingly urgent given the most recent news in December 2016.)

CO2 is not categorized as a pollutant and the trading is supported only by administrative documents, with the climate department outranked by many state-owned enterprises and a very small staff, about 30 people in the NDRC (National Development and Research Commission).   Emission data is very weak, a problem of credibility more than technology, with self-reporting, third party verification and emission data checked against production data for consistency.  As China has strong regional differences in emissions and economic benefits - high emission/middle income (North), low emission/high income (South coast) and low emission/low income sectors (Western provinces), the calculations for each province of air pollution co-benefits range from $2 to $200 per unit of carbon capped, extremely unequally across the country.  

This cap and trade program may simply be symbolic, a gesture to the international  community, but it can also serve as an experiment to build institutional capacity, and a market based policy for reform.  It's the only policy control on CO2, more flexible than command and control, and can help toward an economic soft landing by driving the less efficient businesses out without a big shock.  It also certainly builds the public awareness of climate change.  However, the speaker, Wang Pu, believes the program will not provide all the advertised benefits.


If Alex Steffen is right in this article Trump, Putin, and the Pipelines to Nowhere (https:medium.com@AlexSteffen/trump-putin-and-the-pipelines-to-nowhere-742d745ce8fd#.k2tuyyh7g ), and I believe he is correct in identifying what is happening as a global carbon coup to monetize as much fossil fuel as possible before climate change becomes undeniable, then I suspect the Trumpian USA and Putin's Russia will try to distract China from its own climate change activities like this national cap and trade program.  Might be good to keep that in mind as we descend into the depths of the fossil fools.  

More information on the current cost of carbon at http://www.dailykos.com/story/2015/8/16/1412568/-The-Current-Cost-of-Carbon

More national cap and trade programs?
. yes 0%
. no 0%
. not yes 0%
. not no 0%
. neither yes nor no 0%
. both yes and no 100%
. don't understand the question? 0%
. none of the above 0%

Votes: 1
Results | Other Polls
Both yes and no.

Cap and trade is better than nothing and if the cap is strict and goes down over time and the emissions are well measured and the market place is well functioning, it can be a good way to identify the lowest hanging fruits and go for them first. But from a practical standpoint a gradually increasing tax on carbon fuels is much easier to implement with less risk of perverse effects through market games.

But better than nothing and with enough political will pushing the state companies it can work.

by fjallstrom on Wed Dec 28th, 2016 at 07:55:53 PM EST
Cap and Trade is better than nothing provided that there is no contingent of free credits to the worst polluters that amount to a subsidy for the worst kind of activities. For example cement might get relatively cheaper compared to less carbon intensive building materials in such a system.
by generic on Wed Dec 28th, 2016 at 08:12:17 PM EST
[ Parent ]
I know cement is very energy intensive, presumably from grinding up all sorts of rock to the right degree of fineness, so how is it a less carbon intensive building material?
by Zwackus on Thu Dec 29th, 2016 at 02:09:17 AM EST
[ Parent ]
Oh, oops, I just mis-read what you wrote.  That's what I get for commenting on ET right after waking up.
by Zwackus on Thu Dec 29th, 2016 at 02:09:55 AM EST
[ Parent ]
There are new formulations of cement that can, supposedly, absorb carbon from the air.  When they hit the market is an open question.

Solar IS Civil Defense
by gmoke on Thu Dec 29th, 2016 at 07:48:47 PM EST
[ Parent ]
New Storage Projects Turns CO2 into Stone Sci. Am.
Capturing Carbon Emissions...in Cement? Worldwatch

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Dec 29th, 2016 at 10:18:50 PM EST
[ Parent ]
Your above link: Trump, Putin, and the Pipelines to Nowhere by Alex Steffens is a must read. We know so many of the threads but the whole, taken at once, is impressively scary.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Dec 29th, 2016 at 10:48:40 PM EST

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