IKI supports the introduction of a national emissions trading system in China

In September 2015, Chinese President Xi Jinping officially announced during his state visit to the USA that China will gradually introduce a national emissions trading system (ETS) starting in 2017. The International Climate Initiative (IKI) of the German Federal Environment Ministry (BMUB) is playing an important role in laying the groundwork for the system.

China and the USA are industrialised nations and produce the largest amount of greenhouse gas emissions in the world. The declaration by China in November 2014 to set an absolute cap on emissions from 2030 on the basis of an agreement with the USA constitutes a major step forward for international climate diplomacy. In addition, in June 2015 China pledged a drastic reduction from 2030 of relative emissions by 60-65% measured against gross domestic product. The recently announced ETS will contribute substantially to achieving these targets, as it would further stimulate the already rapidly growing levels of investment in climate-friendly technologies by providing economic incentives. As a result, by 2020 the country could become the world's largest market for emissions certificates.

Since 2012, a project of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) within the context of BMUB's IKI has been providing intensive support to prepare for the implementation of this system. The project is working at regional level together with local authorities and businesses in Shenzhen, Guangdong and Shanghai, as well as at national level with the supervisory government body, the NDRC. As a result, regional pilot systems have been established and further developed in seven Chinese cities and regions. At the same time, experts from Germany have been actively fostering the transfer of knowledge. Therefore it has been possible to draw on the expertise of the German Emissions Trading Authority (DEHSt) at the Federal Environment Agency and German industry representatives, who have already been involved with Europe's EU-ETS since 2005. The project is being financed by BMUB with around EUR 4 million.

Among other tasks, the project is training personnel who will verify emissions values and material and energy flows from reporting companies as part of an accredited inspection body. In addition, locally tailored guidelines for measuring, reporting and verifying emissions are being developed or functional trading platforms established. The project is also supporting the partners in efforts to incorporate the public transportation sector - initially its bus and taxi services - into the pilot system for Shenzhen.

Over the course of the coming year, the IKI project will strengthen its advisory services for the national ETS. This was also reaffirmed at the political level of both countries within the context of deeper Sino-German cooperation on climate change. The challenge for the future will be to integrate the pilot regions from this test phase into the national system and to create a functioning market for emissions trading. This would enable an effective step forward towards limiting and continuously reducing China's CO2 emissions.

Considering the forthcoming international climate conference in Paris in December this Chinese contribution to climate protection is an important step towards successful negotiations.