China Embraces Carbon Pricing and UN Takes a Shine to Plan

Posted by Joseph R. Fonseca September 28, 2014

Millions of visitors and residents could hardly miss the message projected on the side of the world famous United Nations building in New York this week: "Put a price on carbon."

At the UN's Climate Summit this week a diverse group of global leaders, from World Bank president Jim Yong Kim to California Governor Jerry Brown, spoke of the need for polluters to pay for each ton of carbon they emit. More than 1,000 companies pledged their support for the effort.

Carbon pricing, largely rejected by the United States and struggling in Europe, is suddenly all the rage, with China leading the charge. The world's biggest greenhouse gas emitter plans to establish a national market for carbon permit trading in 2016 and has already launched seven regional pilot markets.

Boosters of carbon pricing policies say that once China sets a national price on carbon, others will follow.

"Once China goes live, that will establish a major price (signal) that will affect all the other markets and all other (carbon) prices," said Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change.

China's top economic planning agency has said its planned carbon trading scheme will cover 40 percent of its economy and be worth up to $65 billion.

"You will see a shift in the fulcrum toward China and that will attract other countries," Rachel Kyte, World Bank Group special envoy for climate change, told Reuters.

Governments like Chile and Mexico and U.S. states like California will be keen to link their emerging carbon markets to the Chinese model, Kyte said.

South Korean Environment Minister Yoon Seong-kyu said his country, which in 2015 will be the first in Asia to launch a national carbon market, wants to eventually link its scheme to China's.

Kyte said emerging economies have shown a strong interest in using measures like markets and taxes to rein in pollution, and have joined the Bank's Partnership for Market Readiness for help to shape their carbon pricing policies.

The initiative is helping countries like Vietnam design and pilot carbon pricing instruments in its steel, solid waste and power sectors, Colombia explore the launch of a carbon tax and Kazakhstan fix problems with the pilot emissions trading scheme it launched in 2013.

The International Emissions Trading Association (IETA) has been lobbying since 1999 for an international framework for carbon trading. It also has supported schemes in emerging economies and in U.S. states like California and the U.S. Northeast's Regional Greenhouse Gas Initiative, a power sector trading scheme that launched in 2009.

The group suffered a blow when a national cap-and-trade bill passed the U.S. House of Representatives in 2009 but died in the Senate a year later.

Since then, "We've spent a lot more of our time talking to businesses in China to build capacity to make emission trading work," said Dirk Forrister, president of IETA.