Shenzhen Emissions Trading Scheme Design and Implementation – China

The Shenzhen Emissions Trading Scheme is developing a carbon emissions trading system and issuing carbon fund and carbon bonds. This first-of-its-kind project in China, and the first one in a developing country, has already yielded greenhouse gas emission reductions at scale.

Fast facts:

11% decrease in greenhouse gas emissions in 2013;
635 enterprises and 197 large buildings included in 2013;
40% of total carbon dioxide emissions covered by scheme

The problem

China’s rapid economic growth has come at great cost to the environment, resulting in drastic pollution, including greenhouse gas emissions. The Chinese government is working to cut carbon dioxide emissions – including in Shenzhen, which is the site of one of seven carbon trading pilot projects. Although many companies are obliged to cut emissions, this requires investment. That is currently lacking, particularly because many investors anticipate higher risk for investing in green technologies and climate change, as it is a relatively new field.

The solution

Via the Shenzhen Emissions Trading Scheme, strict measures are being taken to supervise verification bodies – such as establishing a credit rating system, forbidding a company to appoint the same verification body for three consecutive years, and similar measures. An electronic reporting system ensures data safety and independence.

Companies are able to use a greenhouse gas emissions management system to calculate their annual carbon dioxide emissions, submit emissions reports, and upload all necessary documents for verification. Verification bodies then use the system to finish all verification work (except for on-site audits). Finally, the scheme uses the system to check the emissions data, and then submit qualified data to the registry.

Helping the planet

This scheme has already drastically reduced carbon emissions compared to levels from 2011. Energy conservation and emissions reduction in Shenzhen will ultimately lead to a more sustainable city.

Helping people

Continuously introducing fiscal subsidies leads enterprises to promote energy conservation and emissions reductions, and upgrade to new technologies. This promotes economic growth and provides job opportunities, which increases income. A cleaner environment also helps improve health and reduce medical bills. Plans to increase the amount of electronic taxis and buses on the streets not only reduce emissions, but help people get around better on the congested streets of the city. Furthermore, bicycle lanes have been built to promote healthy transportation for the city’s residents.

Scaling up

Special funds arranged by the Shenzhen government support the development of energy-saving emission reduction projects, and of high-tech industries. Enterprises are encouraged to promote energy conservation and emissions reduction, as well as become active emission traders. Efforts are being made to attract more individual and institutional investors to the Shenzhen carbon market, assuring the scheme will continue to grow. Lessons learned in Shenzhen will be instructive to other emissions trading schemes in China, and beyond.