China said to plan pollution trade expansion for emissions

[NEW YORK] China will start a national pollution- trading system to cut global warming emissions and make a substantial financial commitment to help poorer countries move away from fossil fuels, two US officials said.

In a joint announcement with the US, China also will outline changes intended to favour electricity produced domestically by sources that will pollute less, the officials told reporters on a conference call Thursday.

Details will be released on Friday when President Barack Obama hosts Chinese President Xi Jinping for a state visit at the White House, the officials said. The two leaders, who were having a private dinner near the White House Thursday night, are scheduled to hold a news conference midday. Leaders of the two largest economies are using the announcement as a way to prod talks on a global agreement to stem climate change.

"This announcement is another sign of the continued leadership of China and the United States on climate action," Fred Krupp, president of the Environmental Defense Fund, said in a statement. "Their partnership is necessary to solve the global challenge of climate change." The measures are a follow-up to last year's announcement when Obama and Xi met in Beijing that China and the US, the world's No 1 and 2 greenhouse polluters, jointly promised to limit their emissions.

That agreement injected new life into United Nations- sponsored climate talks. Those negotiations are barreling toward a conclusion in Paris in December, where envoys from more than 190 countries are expected to sign a final deal.

"Having the two largest emitters committing to increased action and also providing at least some clarity on the key issues for Paris really does help pave the path for a strong agreement," David Waskow, director of the World Resources Institute's international climate initiative, said by phone.

At the moment, China's economy is still largely driven by fossil fuels. Even as policy makers push aggressively to develop cleaner sources of energy, coal still accounts for about 64 per cent of the nation's primary energy, according to National Energy Administration data.

China's emissions trading system would expand on seven pilot programs already running around the country. The national market would open in 2017 and would cover industries including power generation and iron, steel and cement makers, according to the two officials. They briefed reporters on condition of anonymity to discuss the announcement before it's publicly released.

"According to our tracking, a lot of provinces haven't made a lot of progress on this front yet," said Sophie Lu, an analyst at Bloomberg New Energy Finance in Beijing. "If President Xi commits China to a 2017 start date, then he will effectively be lighting a fire under the seats of provincial governments who still need to complete carbon inventories." Such systems typically put a cap on total emissions and then allow factories, power stations and other sources to buy and sell pollution credits. Proponents say the market encourages innovation and lowers the cost of pollution cuts.

"Expanding a nationwide price on carbon is an important step to help China deliver its climate targets and shift away from coal and towards renewables," Li Shuo, a Beijing-based policy officer at Greenpeace, said in a statement. "In addition, it will place pressure on the US to implement similar measures." The officials declined to specify how much climate aid China will provide to other countries. Mr Obama last year pledged US$3 billion in US support for a UN-organized Green Climate Fund. The money has been a key demand of developing nations who say they can't agree to avoid cheaper but more polluting fossil fuels without financing from richer nations.

In their joint announcement last December, the US promised to cut greenhouse pollution by more than a quarter over the next decade. China pledged its emissions would reach a peak by about 2030 and to boost its use of renewable energy.

To cut its reliance on coal, China is aiming to derive 20 per cent of its energy from renewables and nuclear by 2030, almost double the current share.

"This is part of a growing effort to shift from high-carbon investments to low-carbon ones," the WRI's Waskow said. "With the falling price of renewable energy, what we're seeing internationally is that making that shift in fact makes a lot of economic sense in many places."

BLOOMBERG