China considers national pollution permit trading

January 13, 2014
China Pollution trading

Zhou Shengxian, China’s Minister of Environmental Protection, says his department is looking to increase the use of market mechanisms to help clean up its environment and is considering a nation-wide trading system for pollution permits.

Trading rights to emit air pollutants such as sulfur dioxide and nitous oxide have been a notable success in the United States after a national trading scheme was established in the mid-1990s. And while the US has subsequently balked at applying the same cap and trade mechanism to carbon emissions, China is keen to emulate its market-based pollution control success.

In a post published on the Ministry of Environmental Protection’s website, Zhou said China is working on new regulations for pollution permits and would also publish proposals for new pilot trading projects as soon as possible.

Last week provincial and municipal governments pledged to meet ministry-set targets to reduce air pollution by 5-to-25 percent by 2017. Chinese authorities, however, regularly issue directives to try to tackle air pollution in major cities, but these have had limited effect as economic growth is seen as the priority and enforcement is still lax.

In fact, China already has more than 20 local trading platforms that allow industrial firms to buy and sell air pollution permits but their impact has been limited, Ma Zhong, the dean of the School of Environment and Natural Resources at Renmin University, told Reuters.

"Emission trading in China is not strictly a market activity and it is more like paying for emitting. It is just a few regions running some test trading," he said.

The country already plans to have a national carbon emissions trading platform in place later this decade and currently has five pilot CO2 markets up and running in various cities and provinces. Two more will come on-line later this year.

Last Friday the seven pilot carbon trading platforms signed an agreement with other environmental exchanges to look into trading not only carbon credits but also pollution, water and energy use permits.

China said late last year that it was struggling to meet environmental targets for the 2011-2015 period, with energy and carbon intensity targets still behind schedule.

Nitrous oxide emissions, expected to fall 10 percent over the 2011-2015 period, actually rose 2.82 percent by the end of 2012. Zhou said the total amount was expected to have fallen by more than 3.5 percent last year.