China’s First Carbon Trading Market Goes Online This Week

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China is already set to launch its first carbon trading market this week. Reports said it will be officially opened on Tuesday. Shenzhen, a Special Economic Zone, will be China's first carbon emissions trading market.

"At the moment we know 635 companies will be covered by the Shenzhen scheme," Hongliang Chai of Thomson Reuters Point Carbon consultancy, was quoted by The Financial Times. "But we don't officially know exactly which companies will be covered."

Located north of Hong Kong, Shenzhen is a financial center in South China.

Read: China's Shenzhen Sets June 17 as Start of Carbon Emissions Trading

Specifically targeting carbon dioxide, carbon emissions in a trading market are calculated in tonnes. It is a common method that nations apply to meet their obligations under the Kyoto Protocol, which is basically to lessen carbon emissions in a bid to reduce further potential damage to the world's overall climate structure.

The way carbon emissions trading go, a central authority sets a limit or cap on the amount of a pollutants an entity may emit. This is then sold to firms via emissions permits. A firm normally has more than two number of permits or allowances or carbon credits, equivalent to their emissions. However, the total number of permits cannot exceed the cap, thus limiting total emissions to a certain level only. If firms need to increase their volume of emissions, then they must buy permits from those who require fewer permits.

The trading concept occurs once a transfer of permits happen between entities. The buyer will pay a charge for polluting, while the seller gets being rewarded for having reduced emissions.

As China slowly zoomed to economic greatness, so did its damaging contributions to the environment. Its unparalleled use of coal had earned it the title of the world's biggest greenhouse gas emitter.

"China has embraced the concept of emissions trading and has done so at a very quick pace," Jeff Swartz, director of international policy at the International Emissions Trading Association, said.

However, Anthony Hobley, president of the Climat Markets and Investment Association, said the world is heavily observing China's passion to carry out this commitment to regulate its carbon emissions.

"If they are able to deliver cost effective reductions in emissions without detrimental impacts on the economy then they may well mark the future for China's approach to mitigating climate change and in turn its attitude to an international agreement in 2015," Mr Hobley said.

"Let's not forget that the history of successful international agreements is based on countries formalising what they are actually doing domestically."

Read: Shanghai in China Confirms Start of Carbon Emissions Trading in June (List of Initial Companies Named)

Apart from Shenzhen, Beijing and Shanghai are also expected to start their carbon markets in June. Other carbon emissions trading markets in China scheduled to open in 2013 include Guangdong, Tianjin, Chongqing and Hubei.

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