Guangdong acquires Carbon Market

Guangdong, a province in southeast China often referred to as the “factory of the world” in lieu of its significant industrial production, recently announced the launch of its carbon permits market in December 2013—just a few weeks after Shanghai and Beijing launched their own respective markets. According to the South China Morning Post, the Guangdong market will be the second largest exchange of “pollution rights” in the world, just after the EU, becoming a new pioneer in the field.

The establishment of a carbon market aims to reduce total greenhouse gas emissions through the market exchange of rights and titles initially allocated to companies for carbon gas. The least polluting industries take profits from the sale of their surplus of emission titles, and are thus encouraged to further reduce their carbon footprint. On the other hand, high-polluting enterprises are disadvantaged by their need to purchase additional titles to fit their emissions.

From December 10th, 97% of these carbon credits will be allocated free of charge to the 200 enterprises affected in Guangdong. The total number of titles that will be distributed corresponds to the goal of limiting carbon emissions to 350 million tons in the coming year. The remaining 3% of permits will then be auctioned later in December.

Alongside Guangdong, six other pilot markets have been, or soon will be, launched in Shanghai, Beijing, Tianjin, Chongqing, Shenzhen and Hubei Province in order to create a national carbon market for China. Together, these seven markets will regulate the emissions of 700 to 800 million tons of CO2 per year, the equivalent of the total CO2 emissions of a country the size of Germany.