China has now launched its long-awaited emissions trading system, which is being considered as a key tool in its quest to drive down climate change-causing greenhouse gases and go carbon neutral by 2060.
Trading began at 9:30 am local time (0130) GMT at the Shanghai Environment and Energy Exchange, reports official news agency Xinhua.
The scheme is aimed at setting pollution caps for big-power businesses for the first time.
Also, it allows firms to buy the right to pollute from others with a lower carbon footprint.
China had first announced plans for a nationwide carbon market a decade ago.
However, the progress was hampered by coal-industry lobbying and various policies that pushed for quick growth at the expense of the environment.
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As per the estimates by Citigroup, $800 million worth of credits will be bought for this year, rising to $25 billion by the end of the decade.
This would help in making China’s trading scheme about a third the size of Europe’s market.
According to data from the International Energy Agency, the market will initially cover 2,225 big power producers that generate about a seventh of the global carbon emissions from burning fossil fuels.
At a press conference this week, deputy environment minister Zhao Yiming described it as “a key tool to help the country achieve its goal of reaching peak emissions before 2030 and carbon neutrality by 2060.”
However, analysts say it is not a quick climate fix and could take years before the world’s biggest polluter changes course.
Lauri Myllyvirta, the lead analyst at the Centre for Research on Energy and Clean Air, said officials had “pared down ambitions” for the scheme, which was originally expected to cover seven sectors, including aviation and petrochemicals.
He added, “China’s coal, cement and steel production have all gone up as the government pours in billions of dollars to energy-intensive sectors to boost growth after the pandemic. Rules to limit emissions will disrupt this growth model.”