What are the key issues to be addressed by China in its move to establish Emissions Trading Systems?

What are the key issues to be addressed by China in its move to establish Emissions Trading Systems? / Elie Bellevrat. IDDRI, déc. 2011, 16 p. (Idées pour le débat, working paper ; 17)


Points clés (source et copyright © IDDRI) :

Methods and approach
– The ETS should be a tool at the service of the transformation of the Chinese economy, and it must be considered in a broader low-carbon development strategy.
– Elements of the ETS design should be in line with the national and/or provincial Chinese context and the objectives assigned to the instrument.
– Paying due attention to the consistency of the energy and climate policy package in which the ETS is inserted is of paramount importance, bearing in mind the long-term decarbonation objectives.

Lessons from the european experience
– The initial negotiations process may be long and tough in order to gain stakeholders’ support, with many political implications and obstacles encountered.
– The EU ETS is working with a resulting price and a minimum of liquidity, despite real scarcity has never been encountered and a sometimes hectic and low-carbon price.
– Market participants do not necessarily act as rational agents in the carbon market, especially in the early development of the ETS.
– Institutional aspects are of great importance in order to provide visibility and stability to the market players, and thus not only to trigger short-term abatements (e.g. in the power sector) but also to provide an incentive for long-term investment in low-carbon technologies.

Specificities of China
It is crucial to factor in several specificities of the Chinese context during the implementation of domestic ETS, mainly with regards to the:
– uncertainty on economic growth and its content;
– regulation of the power sector and its reform;
– need for improved MRV on carbon emissions.

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