China’s Booming Carbon Market

The Chinese economy is booming in more ways than one. Not only is it buying up huge reserves of oil and gas, but it is also benefiting from the booming global greenhouse gas market. Rather than spending more money to clean up their factories at home, foreign investors are flocking to China to pay energy companies and factories their to reduce pollution.

China now accounts for 60 percent of carbon credits trading under the Clean Development Mechanism (CDM) developed under the Kyoto Protocol, up from just five per cent a few years ago. The CDM allows polluters in one country to earn credits by reducing greenhouse gas emissions in another. Although initially sceptical, China has now come to embrace the trading system as an opportunity to attract foreign investment in promoting energy efficiency and renewable energy projects.

Beijing has now approved 125 projects so far under the CDM, including wind farms and hydropower generation, as well as chemical-pollutants reduction projects. These are expected to cut 630 million tonnes of carbon dioxide, the main gas contributing to global warming, by 2012, when the first phase of the Protocol expires.

By then, some predict that China could be the main supplier of emission trading units in the CDM market.

“It is possible because China is the biggest developing country,” says Zhang Jianyu, from the Beijing office of Environmental Defense, a U.S.-based group promoting emissions credits trading.