Can a city-wide cap and trade scheme work in Beijing?

Earlier in 2012, China’s National Development and Reform Commission announced plans to launch carbon-trading systems in five cities – Beijing, Tianjin, Shanghai, Shenzhen and Chongqing, as well as in Guangdong and Hubei provinces by 2013.

Beijing is currently preparing its own carbon-trading scheme ahead of a proposed nationwide system to go into effect around 2015. A major challenge for perennially pollution-challenged Beijing remains calculating the impact of “indirect” carbon emissions in the city. While Beijing consumes plenty of energy and creates plenty of emissions, much of the electricity is generated well outside of the city limits. China Daily recently quoted Beijing municipal Development and Reform Commission senior official Yao Fei, who stated that figuring out how to calculate “indirect carbon emissions” in Beijing remains a top priority. Fei noted that up to 70% of Beijing’s electricity is produced outside of the district.

The city is currently researching how to allocate emissions quotas based on the city’s overall target to lower carbon intensity (emissions per unit of GDP) by 18% during China’s 12th Five-Year Plan time period. It is projected that hundreds of companies with carbon emissions totaling more than 10,000 tons per year will be subject to mandatory caps.

Can regional and city-wide carbon cap and trade systems work or will it take a national effort to avoid sticky problems like calculating indirect emissions?