China urged to use market forces to help meet carbon emissions targets
- Former central bank chief Zhou Xiaochuan says linking the European and Asian markets will provide incentives to curb greenhouse gases
- President Xi Jinping has set an ‘ambitious but difficult’ target of making the country carbon-neutral by 2060
China should consider a programme to link the Asian and European carbon trading markets to help reach its goal of becoming carbon-neutral by 2060, according to a former central bank governor.
Zhou Xiaochuan told the International Finance Forum in Guangzhou on Saturday that the target announced by President Xi Jinping in September was “ambitious but difficult”.
Speaking via video link, he continued: “Carbon markets should be the main incentive mechanism as this would require emissions to be capped.”
China is the world’s largest carbon dioxide emitter, producing more than the United States and Europe combined. While the year-on-year increase in emissions is slowing and is projected to peak in 2030, major investment in technology and the transformation of the fossil fuel industry will be needed to become carbon-neutral.
Chinese cash funds African coal plants despite environmental worries
The investment management firm Sanford C Bernstein and consultancy Wood Mackenzie have both calculated that the total cost could exceed US$5 trillion.
Zhou suggested that a tie-up between international carbon trading markets – similar to the Hong Kong-Shanghai Connect that allows investors in the city and Chinese mainland to trade financial products in each other’s markets – could improve efficiency.
Plans to open a carbon futures exchange in Guangzhou by the end of the year and expand a pilot emissions trading scheme across the country may open the way for more foreign involvement, but Zhou said he was worried about arbitrage across global markets.
“A fragmented carbon market will lead to problems in terms of pricing and efficiency. It does no good for global coordination,” he said.
03:05
China vows carbon neutrality by 2060 during one-day UN biodiversity summit
Xi’s carbon neutrality pledge could help build bridges with Europe and Zhou said there was “great potential” for further cooperation, such as a special bilateral fund to collect carbon emissions charges on cross-border flights and shipping.
Zhou also called for the removal of customs duties and non-tariff barriers on environmentally friendly commodities, services and technology.
“Emissions reduction and carbon neutrality will need lots of technology and equipment. We not only need to lower trade barriers, but also complement it with green financing mechanisms,” he added.
China wields green power for diplomacy and global responsibility
Meanwhile, the former president of the European Council Herman Van Rompuy told the forum the EU would uphold multilateralism and a “corrected” form of globalisation that took account of climate change.
He also called for wider cooperation, urging China to sign a long-awaited investment treaty by the end of this year adding: “It’s delivery time”.
