Trading soon to start in China's carbon market

Online trading in China's national carbon market will begin in July, Zhao Yingmin, vice-minister of Ecology and Environment, announced on Wednesday.

The program will replace the European Union's system, launched in 2005, as the world's largest carbon trading system. Carbon trading is the process of buying and selling permits to emit carbon dioxide or other greenhouse gases.

Designated emitters will be given the right to release a certain amount of greenhouse gases. At the end of each cycle, emitters that exceed their permitted amount will have to buy unused permits to offset the extra emissions.

The system is viewed as a financial instrument that could help enhance efficiency in reducing carbon emissions through the help of market mechanisms.

To begin with, the Chinese market will only involve 2,225 companies in the power generation sector, but will be extended to include seven other major carbon-emitting industries, including steel, chemicals and papermaking, according to the ministry.

China began a pilot market project in October 2011 in seven parts of the country, including Hubei province, Beijing and Shanghai.

As of June, the pilot has involved almost 3,000 major emitters from over 20 industries and with a total turnover of more than 11 billion yuan ($1.7 billion), covered emissions equivalent to 480 million metric tons of carbon dioxide.