What are the key issues to be addressed by China in its move to establish Emissions Trading Systems?

Un article [en anglais] consacré aux questions soulevées par la mise en place d'un système communautaire d’échange de quotas d’émission (SCEQE, en anglais Emission Trading System, ETS) en Chine.

Points clés [en anglais] :

METHODS AND APPROACH
- The ETS should be a tool at the service of the transformation of the Chinese economy, and it must be considered in a broader low-carbon development strategy.
- Elements of the ETS design should be in line with the national and/or provincial Chinese context and the objectives assigned to the instrument.
- Paying due attention to the consistency of the energy and climate policy package in which the ETS is inserted is of paramount importance, bearing in mind the long-term decarbonation objectives.

LESSONS FROM THE EUROPEAN EXPERIENCE
- The initial negotiations process may be long and tough in order to gain stakeholders’ support, with many political implications and obstacles encountered.
- The EU ETS is working with a resulting price and a minimum of liquidity, despite real scarcity has never been encountered and a sometimes hectic and low-carbon price.
- Market participants do not necessarily act as rational agents in the carbon market, especially in the early development of the ETS.
- Institutional aspects are of great importance in order to provide visibility and stability to the market players, and thus not only to trigger short-term abatements (e.g. in the power sector) but also to provide an incentive for long-term investment in low-carbon technologies.

SPECIFICITIES OF CHINA
It is crucial to factor in several specificities of the Chinese context during the implementation of domestic ETS, mainly with regards to the:
- uncertainty on economic growth and its content;
- regulation of the power sector and its reform;
- need for improved MRV on carbon emissions.