China Plans The World’s Cap-And-Trade Scheme, But One Expert Says It ‘Won’t Matter’


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Michael Bastasch DCNF Managing Editor
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China announced it will implement a cap-and-trade program to cut carbon dioxide emissions and fight man-made global warming, but some experts are skeptical it will make much of a difference.

“It’s being seized on by some environmentalists because they want to bring the concept here, where companies do actually respond to market incentives,” Derek Scissors, an economist and China expert at the American Enterprise Institute told The Daily Caller News Foundation.

“In China, it won’t matter at all for years, if ever. What drives their emissions is economic growth, which is slowing,” Scissors said.

The world’s largest greenhouse gas emitter, which scientists blame for recent global warming, made the announcement on Tuesday to fanfare from environmental activists who have worked for years on the issue.

Even former Vice President Al Gore weighed in, hailing China’s cap-and-trade proposal as “another powerful sign that a global sustainability revolution is underway.”

Under the program, Chinese power companies will have to buy permits to emit greenhouse gas emissions. Emissions should go down in theory, but that depends on Chinese officials lowering the emissions cap over time.

Gore and other activists see this as China starting to make good on its pledge to meet their Paris climate accord pledges. China has delayed for years on creating a national cap-and-trade program.

China, however, has not released many details, including the cap-and-trade deal’s start date and the details of regulations that would undergird the entire scheme.

China’s program, at least initially, will be limited in scale, covering 3.3 billion tons of carbon dioxide emissions. That’s more than Europe’s program covers, but it only makes up about one-third of China’s total emissions.

About 7 billion tons of greenhouse gases outside of the traditional power sector would be uncovered — that includes steel mills, chemical plants, factories and transportation, among other sectors.

Chinese emissions flatlined somewhat in recent years due to slower economic growth, but China did increase its coal use in 2017, which was the main reason for this year’s increase in global emissions, according to the Global Carbon Project.

China’s program will initially require  power companies emitting 26,000 tons a year to buy permits. China already operates pilot programs in provinces, but those have largely been ineffectual at reining in emissions.

Europe’s cap-and-trade program has failed to make much of a dent in emissions trajectories because officials issued too many permits, which drove prices down. Low emissions prices don’t create an incentive for companies to make cuts.

“The first industry covered is power generation, which is entirely controlled by the state,” Scissors told TheDCNF.

“As they often do, the Chinese are hoping that heavily subsidized state firms which can’t go out of business and must obey all government orders are magically going to respond to market incentives when the government wants them to, and only in ways the government wants them to,” Scissors said.

China’s recent plan to cut back on coal use resulted in thousands of Chinese freezing as temperatures plummeted this winter.

Officials had to scale back plans to get residents to use more natural gas amid shortages and do to the fact many people were only set up to heat their homes with coal.

Environmentalists, however, are still treating this as a win, seeing it as the first step to a larger program in China. Activists are okay with the incremental steps being taken.

“This is like the Mount Everest of climate policy,” Nathaniel Keohane of the Environmental Defense Fund told The New York Times. “It’s an incredibly ambitious undertaking.”

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