China eyes domestic emissions trading scheme

BEIJING, June 6 (Reuters) - China's central bank has drawn up a tentative outline for a domestic emissions trading scheme that could cover everything from greenhouse gases to water pollutants, and speed the country's push for greener growth.

It is the first sign that Beijing is seriously considering a comprehensive national strategy to force its companies to either control their pollution or pay for their excess, as it struggles to meet its own tough environmental goals.

A quota scheme would also help the country keep track of greenhouse gasses at a time when it is coming under international pressure over its rising carbon dioxide output, and could pave the way for eventually joining an international system.

"Our country already has the basic conditions necessary for instituting an emissions quota and trading system," the note read, under the title: "Establish a cap and trade system, implement energy saving and emissions reduction."

The plan, and key emissions trading concepts, were laid out at an afternoon seminar for top officials including the central bank's deputy governor Yi Gang and a deputy general manager of the country's sovereign wealth fund Xie Ping.

They also explored China's previous flirtations with the sector. At least 10 Chinese cities have tried some kind of experimental pollution permit and trade system, and both Beijing and Tianjin are interested in setting up emission exchanges.

The central government has never previously offered more than vague statements of support, but now the country's environmental woes are taking a rising economic and diplomatic toll.

China is widely thought to have overtaken the United States as top emitter last year -- although per person it produces far less of the gas than developed countries -- and is under pressure to speed up efforts to control emissions.

And while a cap and trade system could cover a variety of pollutants, including acid-rain causing sulphur dioxide which is a major problem for China, extensive data on climate change in one presentation suggested greenhouse gasses would be one target.

LONG WAY OFF

The Tianjin exchange which the city envisages as a nationwide emissions platform, could include a variety of contracts including emissions reductions certified under the Kyoto Protocol and possibly clean technology, Wang Jinnan, vice-president of the Chinese Academy for Environmental Planning, told the meeting.

But unless tied in to a nationwide system of quotas it would have no ability to force Chinese companies to clean up.

The introduction of a more comprehensive national scheme is likely some way off, not least because policymakers are only starting to grapple with the complicated issues.

"This is a new topic, the idea is just to introduce the ideas and allow the policymakers to discuss them," said one organiser of the meeting who asked not to be named.

The plan is detailed enough, however, to serve as a framework for action when Beijing does decide to move.

It suggests China establish a national target, decide how to divide it between the regions and then give them discretion to set quotas for companies in their area.

Monitoring and transparency are a top priority in a market for intangible emissions, and the plan suggests a three-tiered system for national, provincial and city level controls.

And environmental concerns do not edge out development.

"The overall emission level should be set by the national environmental authorities according to the environmental capacity, economic development conditions and emission-cutting goal," the plan added.