The European Commission is to step up its collaboration with China on emissions trading, with a new €10 million cooperation project.
The announcement was made by EU Climate Action and Energy Commissioner Miguel Arias Cañete during a visit to China, where Cañete is meeting Chinese officials as well as EU industries and businesses.
The three-year project, which starts in 2017, will enhance EU-China cooperation on emissions trading and coincide with the launch of a nationwide carbon market in China, according to EC.
Miguel Arias Cañete said: “China is sending an important signal as we embark on our journey to implement the new global climate change agreement: that emissions trading is a cost-effective way to cut greenhouse gas emissions. The world’s second largest economy will be using emissions trading to reach its Paris pledge – and not in the distant future, but next year.
“With more than a decade of experience with the EU emissions trading system, the EU is well placed to support China. Cooperation between the two largest emissions trading systems in the world will send a strong signal to other countries as they prepare to implement their Paris commitments.”
As well as addressing challenges related to the setting up of a national emissions trading system, the new cooperation project will also establish a regular dialogue to discuss developments on emissions trading in China and the EU.
It will build on the existing cooperation project which started in 2014 and has supported the roll-out of seven pilot schemes across the country.
The EU emissions trading system (EU ETS) is a cornerstone of the EU’s policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively.
The EU ETS works on the ‘cap and trade’ principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall.
Within the cap, companies receive or buy emission allowances which they can trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world. The limit on the total number of allowances available ensures that they have a value, according to EC.
After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.