Office for Environmental Programs - Theses

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Subject: Policy × Author: Chen, Lanyun ×

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    The challenges of emissions trading in China
    Chen, Lanyun ( 2012)
    Under the 12`h Five-Year-Plan (FYP), China is moving forward to the implementation of pilot emissions trading scheme (ETS). This would be the first experiment of mandatory ETS in China and also an important sign on the evolution of the climate policy for China. Voluntary emissions trading practices based around Clean Development Mechanism (CDM) and Voluntary Emissions Reductions (VERs) have existed in China in recent years. By contrast, the upcoming pilot ETSs in China will be mandatory for covered sectors and installations. This research compares the EU ETS and the CCX with the China's proposed mandatory pilot ETSs and existing voluntary ETS respectively. Then, challenges that China's ETS may face can be suggested based on the key criteria come up from the EU ETS and the CCX. The challenges of China's ETS can be found in the respects of the establishment of regulatory contexts, cap setting-up and allowances allocation, designing and implementation of a compliance framework, and establishment and operation of diverse trading mechanisms. When comes to the co-operation and linkage among proposed Chinese pilot ETSs and a future national ETS in China, two most possible scenarios are discussed in the thesis. The first potential scenario is that the national ETS replaces pilot ETSs. The second potential scenario is that pilots are linked directly and then to expand as the national ETS. On the other hand, the potential linkage between China's ETS and the EU ETS can be expected, especially as the European Commission announced that the EU would assist China in establishing the national ETS according to an agreement signed by the EU and China in September 2012. However, there will be several issues existing in the establishment of a linkage. Whether those two ETSs are compatible and the allowances are recognised by each other are the key elements of the potential linkage building between the EU ETS and the future national ETS in China.