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Jun 07, 2010, 09.44 AM IST | Source: Reuters

China carbon market prospects not optimistic

Although China has supplied massive volumes of carbon credits to the global market, prospects for CO2 trade within the country itself are not optimistic, a senior climate official said on Sunday.

China carbon market prospects not optimistic

Although China has supplied massive volumes of carbon credits to the global market, prospects for CO2 trade within the country itself are not optimistic, a senior climate official said on Sunday.

Lu Xuedu, influential vice-head of China's National Climate Centre and former member of the United Nations Executive Board responsible for approving clean development mechanism (CDM) projects, told a conference in Beijing that carbon transaction volumes within China were likely to remain low.

"The domestic market will probably remain small, because you just need to ask the simple question -- Who will buy emissions in China?" he said.

Under the UN's Kyoto Protocol, China has been under no obligation to cut its own carbon emissions, and Lu said the only potential domestic buyers were big enterprises or high-income celebrities trying to improve their reputations.

China has been a supplier rather than a buyer of carbon credits and remains a key player in the CDM, a part of the Kyoto Protocol that allows industrialised nations to invest in clean projects in the developing world in exchange for offsets known as certified emission reductions (CERs), which can either be traded or used to comply with mandatory national CO2 targets.

China has been by far the biggest supplier of CERs on the world market, but developers have not been allowed to trade the credits domestically. Instead, a plethora of new environmental exchanges in Beijing, Shanghai and elsewhere have expressed hope that voluntary emissions markets will emerge to fill the gap. However, voluntary volumes have so far remained negligible.

There have been around 3,000 trades of voluntary emission reductions (VER) in China so far, exchange officials said, involving a total volume of 10,000 tonnes. The global total stood at 93 million tonnes last year, down 27 percent compared to 2008, according to research released on Sunday by Bloomberg New Energy Finance.

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READ MORE ON  China, carbon, climate

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