Compared with carbon taxes, Lu said, cap and trade is more likely to be accepted by Chinese industries because it provides more options to meet their obligations. The industries can generate cash by selling unused carbon allowances for profit if they reduce emissions more than required.
Meanwhile, Chinese leaders hope that one day China's carbon market will tie into existing markets in Europe and elsewhere, giving the nation a bigger say in global matters. A carbon tax policy can only be implemented in China, so it can't provide that benefit.
Yet Chinese leaders have recognized that they will need more practice at home before joining the international pact. The country's regional carbon trading plans call for market integration among the seven pilots by 2015.
There is also a call to help more polluters get familiar with carbon trading. While still not included in the upcoming system, hundreds of facilities in Guangdong and Shanghai are being required to monitor and report their emissions, a move designed to prepare them for serious trading.
At first, only carbon dioxide will be covered in China's cap-and-trade systems. But over time, the types of greenhouse gases regulated by the Chinese pilot regions will increase, widening the scope of the nation's emissions reduction.
Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500