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The ‘Black Hole’ Of Chinese Carbon Trading

Pilita Clark, Financial Times

The emissions trading markets in China are not supplying any relevant information about supply and demand. “It’s a black hole,” says one international carbon trading expert.

One man is scrolling slowly through his emails. Another is flopped across his desk doing a good imitation of being asleep.

It is a Wednesday afternoon at the China Beijing Environment Exchange, a centrepiece of China’s closely watched efforts to test carbon markets, and the action is not exactly frenzied.

“There are currently around two to three trades a day,” says Yang Wang, the exchange’s carbon trading centre director.

That is up from two or three a week in November, when Beijing became the third of four Chinese cities and two provinces to launch a pilot emissions trading system since June.

With more schemes on the way, experts say China will soon be regulating about 1 gigatonne of carbon dioxide, or nearly 10 per cent of the annual emissions that make it the world’s biggest carbon polluter.

As prices languish in the largest carbon market in the EU and Australia ditches plans for a carbon tax, environmental activists have seized on China’s efforts as proof that action to tackle climate change is far from dead.

However, nearly a year into the test run, the pilot schemes are provoking considerable bafflement and frustration among those trying to grapple with a carbon market with Chinese characteristics.

“It’s a black hole,” says one international carbon trading expert, explaining that the customary reluctance of officials to release information makes it hard to understand how market prices are being set.

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