Beijing and UN to set up carbon trading exchange

By Mure Dickie in Beijing and
Fiona Harvey in London

China and the United Nations are working to set up a carbon trading exchange in Beijing — a move that could establish the Chinese capital as a center for the multibillion-dollar global trade in carbon credits, according to the UN’s top official in China. If successful, the new exchange - which would be the first in the developing world — would compete with private sector carbon exchanges established in Europe and the US, and would help further to open up the lucrative Chinese market in carbon credits. Carbon credits are issued by the UN under a provision

of the Kyoto protocol known as the clean development mechanism, by which developed countries invest in projects, such as wind farms or hydroelectric projects, that reduce greenhouse gas emissions in poor countries. The credits can fetch $15 to $18 on the international market. About $3bn (€2-3bn, £1.Sbn) in carbon credits from developing countries were traded in the first nine months of last year, according to the World Bank. The UN’s climate change secretariat said China was expected to account for 41 per cent of carbon credits issued

by the UN by 2012. Although there are several exchanges dealing in carbon in Europe, and one in Chicago in the US, the carbon trading market is fragmented at present, with many trades carried on out side exchanges through brokers or between companies. The Beijing exchange is to be set up as part of a carbon finance initiative agreed by the United Nations Development Programme with the Chinese Ministry of Science and Technology and the powerful National Development and Reform Commission, said Khalid Malik, the UN resident

coordinator in China. “I hope we can actually launch it this year. The sooner the better,” he said. Mr Malik said he hoped the exchange would also trade in special carbon credits that would be tied to the UN’s eight “millennium development goals”, which range from halving extreme poverty to universal primary education by 2015. While mixing the climate change goals with efforts to fight poverty, Aids and the loss of biodiversity will make the certification of the credits much more complicated, they

may appeal to companies keen to polish their reputation for social responsibility. However, UN officials said it could be difficult to design such credits before 2012, when the current provisions of the Kyoto protocol expire, though they could form part of an expanded carbon trading system if a successor to the treaty is agreed. The UNDP said most existing emission reduction projects in China offered “little or no impact on sustainable development”. “Companies want very “green credits,”

said Kishan Khoday, UNDP energy and environment team leader. Many of the credits issued in China so far have come from the installation of equipment to curb emissions of HFC-23, a much more potent greenhouse gas than carbon dioxide, generating large profits for a small outlay. Mr. Malik said he hoped there would be considerable private sector involvement in the operation of the planned exchange. However, its creation will be a big challenge for Chinese regulators with little experience in the sector.