A planned nationwide carbon trading scheme set to be put in place in 2017 is likely to be more than twice the size of European Union’s Emissions Trading System (ETS), which is currently the world biggest carbon market.

Carbon trading is the system of buying and selling credits tied to the emission of greenhouse gases (GHGs).

The theory behind it is that as regulations on emissions are tightened, the price of credits will rise, discouraging power companies and other industrial concerns from pumping climate-changing GHG emissions into the atmosphere.

At present, the ETS scheme – which accounts for about 80 per cent of the global carbon market − trades the equivalent of about two billion tonnes of carbon-related allowances each year. But China’s trading system, when it becomes fully operational, is likely to trade between three and five billion tonnes per year.

Bilateral agreement

China is both the world’s largest emitter of GHG emissions and the biggest energy consumer. Putting in place a carbon trading scheme was an important element in the country’s pledges made under the terms of last year’s Paris Agreement on climate change.

The development of a carbon trading market also formed part of a bilateral agreement on climate change made between China and the US in late 2014.

The implementation of a nationwide carbon market is one ingredient in Beijing’s overall plan to reach peak emissions by 2030, and thereafter radically reduce output of GHGs. In order to meet its emissions reduction targets, China has been investing heavily in solar and wind power.

Carbon trading is also seen by Chinese officials as a way of tackling the country’s serious air pollution problems and related health issues, particularly evident in major cities such as Beijing and Wuhan.

“ Carbon trading has a mixed history. The ETS system
in Europe has failed to establish carbon prices that
properly reflect the environmental damage caused
by CO₂ and other GHGs ”

In recent years, China has been running a number of pilot carbon trading systems in cities and provinces, mostly in the country’s industrialised eastern region. Since 2013, the cities of Beijing, Shanghai, Tianjin, Shenzhen and Guangzhou have been involved in carbon trading, as have the provinces of Guangdong and Hubei.

Chinese officials say that, initially, companies in eight sectors of the economy − power generation, petrochemicals, chemicals, building materials, steel, ferrous metals, paper making, and aviation − will be included in the nationwide trading programme.

The country’s powerful National Development and Reform Commission says more than 7,000 companies – many of them giant, state-controlled enterprises – accounting for about 50 per cent of China’s total GHG emissions are to be included in the scheme.

Carbon trading has a mixed history. The ETS system in Europe, which started operating in 2005, has failed to establish carbon prices that properly reflect the environmental damage caused by CO₂ and other GHGs.

A mismanaged system of granting carbon allowances, and a lack of proper monitoring, are among the main reasons cited by analysts for the poor performance of the ETS.

Secretive system

There are fears that China’s system could suffer similar problems. Analysts point out that running an efficient carbon trading scheme is reliant on the supply of full and accurate data, which is often lacking in China’s heavily-politicised and often secretive industrial system.

Many companies and locally-based officials might also lack the expertise to monitor emissions accurately.

More generally, analysts say that although central government sees carbon trading as a central part of its plan to tackle climate change, powerful regional officials could sabotage the system by granting favours to local industries.

China’s plans to reduce GHGs are under pressure from various quarters. A new report by Climate Tracker, a UK-based thinktank that analyses climate-related developments in the energy sector, points out that despite large-scale GHG reduction plans, massive investments are still being made in China’s coal industry.

Climate Tracker says falling energy demand, plus tighter regulations on GHG emissions, mean that China’s coal sector faces chronic overcapacity.

Their report warns that investments of billions of dollars could be lost, with serious consequences for China’s financial system.

This post originally appeared on the Climate News Network

The post Market forces appeared first on Corporate Knights.

On one hand, Ireland’s planners want to see significant growth in its food and agriculture industry – a sector that is one of the main pillars of the country’s economy, accounting for about 8 per cent of gross domestic product.

On the other hand, the country − along with other members of the European Union (EU) − is committed to lowering greenhouse gas (GHG) emissions by “at least” 40% below 1990 levels by 2030.

The dilemma is that about a third of Ireland’s total emissions already come from agriculture and food production − from methane produced by the flatulence of the country’s seven million cattle, and from the widespread use of nitrogen-based fertilisers on its abundant grasslands.

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Binding targets

The publication of a new report, produced jointly by Ireland’s Institute of International and European Affairs (IIEA) and the Royal Dublin Society (RDS) highlights the clash between government economic goals and EU binding targets for bringing down GHG emissions.

“Ruminant-based agriculture is of crucial importance to the Irish economy, and Ireland’s land use pattern is exceptional by EU comparison,” the report says.

“Plans for the continued expansion of food output, focused in particular on the dairy sector, and increasingly stringent emissions reductions suggest a growing contradiction between Ireland’s climate and agriculture policy objectives.”

The report recommends that farmers become more “climate smart”. Large-scale investments need to be made in new technology and science in order to promote more carbon-efficient dairy and beef production systems. And the agricultural sector should also encourage more recycling and renewable energy use.

The rate of afforestation should also be speeded up. About 11 per cent of Ireland’s land is currently forested, compared to an EU average of more than 40 per cent.

Under the government’s Food Wise 2025 programme, a near doubling of food and agricultural exports is envisaged over the next nine years.

One of the central aims of the plan is a big expansion of Ireland’s dairy and beef herds − and, in so doing, the creation of thousands of jobs in often disadvantaged rural areas. At present, Ireland’s agriculture and food sector accounts for 11 per cent of exports and nearly 9 per cent of employment.

But GHG emissions from the sector are proportionately larger than those of any other EU state − and methane is a considerably more powerful GHG than carbon dioxide, even though it stays in the atmosphere for a comparatively far shorter period.

The IIEA/RDS report says agricultural emissions are increasing, and warns that if Ireland does not take steps to meet GHG reduction targets it will have to pay millions of euros in fines to the EU.

Farming organisations, which have considerable influence in Ireland, have objected to the report and have successfully lobbied politicians both at home and in Brussels for reduced emissions targets.

Under new European Commission rules, member countries’ agriculture sector emissions can be offset by planting more forests and other beneficial environmental practices.

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Loopholes for polluters

The move has been strongly criticised by environmental organisations. They say the new measures provide too many loopholes for polluters, while Green parties in the European Parliament accuse the Commission of behaving “as if the COP21 Paris climate summit never happened”.

In Ireland, environmental organisations say there must be a complete reversal of government policy if agriculture is to become sustainable, with a shift away from livestock and from the consumption of red meat and dairy products.

The IIEA/RDS study says other countries are facing similar problems to Ireland’s. “Over the coming decades, emissions from agriculture and land use will increasingly become centre stage as other sectors of the global economy are decarbonised,” it says.

“A key conclusion of this analysis is that Ireland can consider itself a test case for dealing with these issues.”

This article was produced by the Climate News Network

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