China will begin rolling out carbon trading schemes by deploying two preliminary measures in Beijing and Shanghai, Reuters reports. As part of seven different carbon trading programs that China plans on implementing in various regions across the country, Beijing and Shanghai each got their own plan for carbon credits from the Chinese government.
According to the plan, firms that pollute above a certain level will have to purchase the right to emit carbon from other firms or from the government, setting up a market for the purchase and sale of emissions. The news comes in the wake of an international conference on climate change in Warsaw, during which China pledged to do its part to curb carbon emissions, Bloomberg reports.
China is currently the world’s largest source of carbon emissions. In a way, this makes sense, given the country’s enormous population, but Chinese officials have repeatedly claimed that fighting emissions and pollution needs to be a goal for the country moving forward. By establishing a forum for solving the problem by using markets rather than by using government regulation to control the issue, China is showing a willingness to rely on markets as opposed to laws.
However, some have expressed concern over the efficacy of the system. While the rules governing the trading of emissions are beginning to be put into place, enforcement protocols are still largely absent. This means that it is difficult to ensure that companies will actually be in compliance. In a country that has had problems with corruption and monitoring before, especially outside of the largest cities, a carbon trading program could be difficult to roll out across the entire country even if it does work on a more limited scale.
Another issue with the plan is that it may be difficult to actually collect and impose fines on companies that are not following the protocols. It is one thing to say that a firm is emitting too much; it is another thing to be able to actually incentivize that firm to alter its behavior. With current fines amounting to little more than a slap on the wrist, the policy is being criticized for having too much bark and not enough bite.
The good news is that many corporations in China are state-owned, meaning that the order for compliance can come from within if the government throws its weight behind supporting the measure. Since it would be awkward for state-owned firms not to be in compliance with the government’s own laws, many analysts expect the measures to be followed by several of the biggest companies in China for that reason alone.