Tianjin trades in carbon for first time

Tianjin launched China's fifth regional emission trading market on Thursday as the country deepens efforts to use market mechanisms to fight climate change.

A total of 4,040 permits were transacted on the first day of trading and buyers included PetroChina Co, according to the Tianjin Climate Exchange which hosts the market. Each permit gives the right to discharge one ton of dioxide.

The permits traded at an average price of 29.78 yuan (US$4.90) in Tianjin yesterday, close to 29.50 yuan in Shanghai but far below 67 yuan quoted in Shenzhen yesterday. The wide gap in prices means the scarcity of permits varies a lot among different regions and it will take time before China can set up a national market. China has said it intends to create a national carbon trading market after 2015 following the regional trials.

In carbon trading, a cap is set on the amount of carbon dioxide that may be emitted, and the limit is given to participating firms in the form of carbon permits. Participants have to buy permits for each ton of CO2 they emit beyond the cap given by the government.

The central government has pledged to cut greenhouse gas emissions per unit of gross domestic product to 40-45 percent below 2005 levels by 2020. Carbon trading is seen as a key tool to help achieve that target.

Shenzhen was the first Chinese city to start carbon trading when it launched in June. Shanghai was next last month, followed by Beijing and Guangdong Province.