China commences its first carbon trading scheme

The Chinese city of Shenzhen is to be the site of the country’s first carbon trading scheme.

As ABC/AFP report, the city will host one of seven pilot schemes which will aim to reduce greenhouse gas emissions.

The six other schemes are also planned to start this year. They will be located in Beijing, Chongqing, Guangdong, Hubei, Shanghai and Tianjin.

Shenzhen, located near Hong Kong, is one of China's Special Economic Zones. It has committed to reduce the emissions intensity of its economy by 21 percent below 2010 levels by 2015.

China is aiming to eventually introduce a national scheme, also in 2015.

The Shenzhen scheme will cover 635 companies in 26 sectors, including industrial, manufacturing, electricity, natural gas and water supply.

These companies will be allowed a set quota of carbon dioxide emissions and they will have to buy carbon credits if they intend to exceed their quota. And, if they don’t hit their quota, they will be able to sell excess permits to other firms.

The scheme covers only 38 per cent of Shenzhen's emissions and it is not expected that it will have a significant impact on China’s overall emissions. Indeed, these are expected to rise until around 2030.

However, it is a first step in setting up a national strategy and eventually reducing emissions.

As Deputy CEO of the Climate Institute Irwin Jackson told Radio Australia's Asia Pacific, “China has been taking action to reduce pollution and encourage clean energy industries for a number of years now."

"But this is the first time we'll actually see the emergence of an absolute cap on emissions."

While China is the world’s largest greenhouse gas emitter and expects to continue to increase emissions until 2030, many see it as being well prepared for a low carbon future.

Its emissions per capita are well below those of Western nations and Beijing is aiming for a 40 per cent reduction from 2005 levels of carbon intensity by 2020. Carbon intensity measures the amount of carbon produced per unit of economic output.