China goes softly on carbon price

Energy companies won’t be directly taxed under China’s carbon trading scheme, which has been delayed, undercutting claims by the Gillard government that the world’s second-largest economy is taking quick, tough action on climate change.

China had been planning to launch a national emissions trading scheme in 2015 after pilot schemes across five cities and two provinces. But the project’s top official said energy and power companies wouldn’t be directly taxed and the national scheme would be pushed back until at least 2016.

Climate Change Minister Greg Combet, who is in Beijing for talks with Chinese officials, said the design of the schemes was being debated in China but admitted they were likely to be delayed.

The Gillard government wants ­carbon markets established in China and elsewhere because they will drive demand for carbon credits generated by Australian companies.

“We had quite lengthy discussions about coal-fired electricity generation, so these are obviously matters to be resolved within China’s decision making processes,” Mr Combet said after talks with Xie Zhenhua, the vice- president of China’s key economic body, the National Development and Reform Commission.

“I am not going to pre-judge it or reflect upon the legitimacy of what is being done. The initiatives that have been announced are extremely important and Australia will work with China as carefully as we can to co-operate in the development of these schemes,” he said.

The director general at China’s Energy Research Institute, Han Wenke, told The Australian Financial Review that energy companies would not be directly included in the pilot versions of the emission trading schemes. Mr Combet said that coal-fired electricity stations “could be included” in Beijing’s pilot scheme.

China produces about 20 per cent of global carbon emissions because, like Australia, coal is the main energy source but coal power plants are among the biggest emitters of greenhouse gases and coal use has been increasing about 17 per cent a year.

“It [coal] is part of the future selection definitely. The energy issue really relates much more to the energy conservation potential,” Mr Han said. “In China, every sector, every organisation and every industry has a large potential for energy conservation. So the trading scheme is not our very urgent task because we still have requirements for such sectors to explore their potential [for energy conservation], and then we can use the trading scheme to incentivise them.”

The Gillard government has pointed to the schemes as proof that the world’s largest carbon-emitter was taking firm action on climate change.

Financial Review

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