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It’s time for a national carbon trading program

Dan Dudek
Updated: Mar 7,2016 8:08 AM     China Daily

At no time in the past have the prospects for progress on climate change been more positive

As with any new year and new plan, there are many hopes for the future. We will all be looking for signs favoring our own favorite policy, program, or sector.

Since I am an environmental economist, I look for green shoots, and I am very optimistic about the 13th Five-Year Plan (2016-20) because the ground has been so well prepared.

I believe that President Xi Jinping shares my environmental and economic outlook. Shortly after taking office, in a study session with members of the Political Bureau of the Communist Party of China Central Committee, he said, “We have to understand that to protect the environment is to preserve our productivity, and to improve the environment is to develop our productivity”-for no environmental problem we face is more salient than the challenge of climate change. If we do not master this threat, natural, human, and economic productivity will suffer dramatic decline.

Xi has followed this philosophy in the path he has blazed for the nation toward green, sustainable, low-carbon development. He has committed the nation to peak its carbon emissions at or around 2030. He committed China to introduce a national carbon market by 2017 as a primary tool to achieve this target.

The seeds for this dramatic change were planted in 2013 at the committee’s Third Plenum. The first idea to sprout was the carbon trading pilot program in Shenzhen, followed by others in Shanghai, Guangdong, Beijing, Tianjin, Hubei and Chongqing. Since then, more than 2.2 billion yuan ($338 million) worth of carbon quotas have been exchanged. These pilots, undertaken in places that together account for nearly 30 percent of China’s GDP, have borne fruit and inspired the president to go forward with a national program.

Now it is time for the 13th Five-Year Plan to provide the guidance and resources to create the national carbon trading program.

The program will require institutional infrastructure to function effectively. For example, a clear legal foundation is needed to give market participants the confidence to invest in a low-carbon future. Direction concerning the allocation of carbon quotas is required especially in the case of auctioning, which provides an opportunity both for efficient distribution as well as the dedication of revenues for investment in further reductions.

A national registry to support the tracking of emissions reductions to ensure compliance with required reductions needs to be constructed. Personnel will have to be hired and trained for compliance and enforcement roles. If covered businesses are to have a full suite of risk-management tools, then the government needs to invest in the development of a futures market for carbon.

China has established itself as a world leader in clean energy, bringing significant benefits to its economy. This is one example of why the new normal-a phase of slower but a more sustainable mode of growth-in China presents a fortuitous moment to reform and focus on the potential growth areas of the Chinese economy: healthcare, including for the aged; education; and environmental protection.

A national carbon trading program can be the centerpiece of the greening of China, but the government needs to provide impetus with a clear focus on the priority of reducing carbon emissions. Beyond a positive effect for the economy, substantial co-benefits, especially lowered health risks from reducing air pollutants associated with carbon emissions, would accrue to the nation.

At no time in the past have the prospects for progress on climate change been more positive, nor the urgency more clear. It is my hope that in this year of the energetic monkey, we will see commitments turn into action that will truly form the foundation of ecological civilization.

Dan Dudek is mainly responsible for the Environmental Defense Fund’s operations in Asia. He is a leading expert in developing cap-and-trade programs to reduce pollution at the lowest possible cost.

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