Hegang: carbon trading could consolidate the steel industry

After the failure of the Copenhagen climate summit in 2009 and the limited progress at Cancun in December last year, an international binding climate change treaty seems some way off. Countries and regions will therefore have to develop their own independent strategies for confronting climate change, at least in the short term. How China responds will be crucial to the global effort. Contrary to many observers’ expectations after Copenhagen, China has made progresson this front. It is now weighing up its options going forward, including cap and trade.

SBB 22 November 2010 China’s goal of consolidating its steel industry could be furthered by the introduction of a cap and trade scheme for greenhouse gas emissions, according to Yang Hongbo, general manager of Hebei Iron & Steel.

Moves to consolidate the industry have often been opposed by local governments, which are concerned about the loss of tax revenue, Steel Business Briefing understands. But a cap and trade scheme which compensates local governments with carbon credits would remove this barrier, says Yang.

The Development Research Centre of the Chinese State Council is currently investigating cap and trade and recently met with members of the Carbon Market Investors Association (CMIA) in London, SBB understands. CMIA also emphasised the importance of a pilot scheme at this meeting. London is now the centre of investment in the carbon trade, more than a decade after the first pilot scheme was carried out in the UK, says Gareth Phillips of Sindicatum Carbon Capital, who participated in the meeting.

There are many issues to be resolved before a cap and trade scheme can be established in China. For example, it has still to resolve the issue of how to avoid double counting as it is a major generator of UN carbon credits, Phillips points out. “The issue of how it will link in to other cap and trade schemes, such as those in Europe and New Zealand also needs to be addressed”, he adds. Nevertheless, China has said it will have a trial cap and trade pilot scheme running by its 13th five-year plan (2016-2020).


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