Across The Border | China’s national carbon trading rollout expected to have major impact on key industries

China, the world’s largest greenhouse gas emitter, may roll out a national carbon trading scheme in July this year, which will have deep implications on key industries including power generation, petrochemicals, chemicals, iron and steel, and aviation, analysts say.

Chinese authorities were “on the home stretch” of preparation for a national cap-and-trade programme for carbon emissions, which was likely to kick off in July, the state-run Economic Information Daily reported last week.

“Putting a price on carbon emissions can be an effective means to hasten the transition to a lower-carbon economy,” said HSBC analysts Chan Wai-shin and Thomas Hilboldt, lead authors of a recent research report on the subject.

Under the programme, the government will set a limit on the amount of carbon dioxide to be emitted annually. Companies are then issued permits that allow them to hold credits in order to emit an equivalent amount of carbon dioxide. Companies that need to increase their credits must buy from those that emit less.

“Over time, we think the national [emissions trading system] will become an established platform in China, leading to more carbon-efficient industries. This has implications for the long-term outlook for those industries and companies,” the analysts said.

The national scheme will build on the seven existing regional carbon trading markets in Beijing, Shanghai, Shenzhen and several other cities.