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Changsha Jumps On Emission Scheme Bandwagon

Eric Ng and Reuters in Beijing – Updated on Aug 07, 2008 – SCMP

Changsha yesterday became the third mainland city in two days to announce an emissions trading scheme designed to penalise polluters and encourage greener sources of power through pollution credits.

The capital city of Hunan province will set up a local emission trading scheme covering a variety of waste gases and water pollutants, with plans to set up a trading market, Reuters quoted mayor Zhang Jianfei as saying. The system could be in place as soon as next year.

Quotas for dust, carbon dioxide and chemical oxygen demand – a water pollution measure – would be assigned to local districts. Those failing to meet the quotas would be fined, unless they purchased quotas from polluters that had credits to spare.

The announcement came a day after Beijing and Shanghai both launched emissions exchanges.

China Beijing Environment Exchange chairman Xiong Yan said that the exchange would lay a foundation for China to use market-based methods to reduce pollution and save energy by enhancing transparency and information flow.

“There is huge potential in the environment exchange market of China,” he said. “However, the asymmetric information and lack of expertise in Chinese enterprises result in a serious undervaluation in environment exchange products.”

The Shanghai Environment and Energy Exchange was also inaugurated on Tuesday.

Xinhua quoted unnamed municipal officials as saying that the city plans to launch an emission quota allocation and trading system for heavy-pollution-prone sectors.

In addition, some 55 environmental protection and alternative energy projects involving 1.07 billion yuan (HK$1.22 billion) of investment are planned to be listed on the exchange to attract new investors.

They are currently listed on the Shanghai United Assets and Equity Exchange.

Tianjin was also planning to set up an environment and energy exchange, China Daily reported.

Simon Powell, CLSA’s head of regional power, gas and utilities exchange, said news of the exchanges was not unexpected. Several pilot arrangements have been set up on the mainland for voluntary sulphur dioxide and particulates emissions reduction.

“As to the impact on power companies, it would depend on the level of the emission cap to be imposed, the timing and whether it is voluntary or mandatory,” said Mr Powell.

“It is possible that the mainland may adopt a voluntary scheme on sulphur dioxide, nitrogen dioxide and particulates but not carbon dioxide.”

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