Syndicate content

East Asia and Pacific

Marching forward: China is creating the world’s largest market-based carbon pricing system

Vikram Widge's picture
China – the world largest emitter of greenhouse gases – is implementing a national carbon market in 2017

During his visit to Washington last week, China’s President Xi Jinping confirmed that the world’s largest greenhouse gas emitter, which has pledged to reduce its carbon intensity and reach a peak of overall emissions by 2030, will use a cap-and-trade market approach to help realize this. 
China already has 7 pilot markets in cities and provinces in place that cover 1 billion tons of greenhouse gas emissions annually. Under the national scheme, now to go live in 2017, this could increase to 4 billion tons according to Chinese researchers - making it the world’s largest national emissions trading system.

It’s an exciting step and demonstration of China’s commitment to achieve its low carbon goals. 

Faster track to better carbon prices

Grzegorz Peszko's picture
Carbon pricing instruments implemented or scheduled for implementation,
with sectoral coverage and GHG emissions covered.

​Many of my compatriots in Poland, where over 90 percent of power generation comes from burning coal, are concerned that the EU climate policy is a risky outlier.

​They worry that the EU Emissions Trading System may expose domestic industry to unfair competitition and cause companies to move production to countries where emission costs are lower, something called “leakage”.

The two reports recently released by the World Bank may change this perception.

Climate action does not require economic sacrifice

Rachel Kyte's picture

Also available in: Español | Français | العربية

Harvesting rice-fields in a White Thai village in Mai Chau, Hoa Binh province, northern Vietnam.
Harvesting rice-fields in a White Thai village in Mai Chau, Hoa Binh province, northern Vietnam.

More than two decades ago, the world agreed on the need to confront climate change.

The U.N. Framework Convention on Climate Change (UNFCCC) emerged in 1992, spawning a variety of negotiating forums with the goal of preventing catastrophic impacts from planetary warming caused mostly by polluting societies.

It's easy to overlook the progress that has occurred since, because we still have so far to go. Droughts, flooding and cyclones that already seem to be the norm are just the latest warnings of what is coming, and preventing much worse requires immediate and aggressive action to drastically reduce greenhouse-gas emissions.

Emissions trading in China: Early lessons from low-carbon pilots

Lasse Ringius's picture


A local emissions exchange in China. Lasse Ringius/IFC
A local emissions exchange in China. Photo: Lasse Ringius/IFC


China, the biggest source of CO2 emissions globally, accounts for more than 27 percent of the world's emissions. China is the first developing country to control CO2 emissions through a cap-and-trade system. Once a national carbon market is established, which could be as early as 2017, China will overtake the European Union (EU) to become the biggest carbon market in the world. The Chinese market will significantly alter the balance of power in global carbon markets in the mid-term. Significant challenges remain, and the IFC, a member of the World Bank Group, is helping China to overcome them with a project in Shenzhen that addresses key barriers to carbon trading.

Fundamentals of Emissions Markets

Once a liquid carbon market has been created, trading will mostly happen via forward and futures contracts. These instruments help companies to protect themselves against volatile prices and to hedge their carbon position. In the EU, exchange platforms emerged as one of the main mechanisms aimed at simplifying transactions, reducing risk and facilitating transparent pricing. As trading platforms, exchanges can facilitate price discovery and offer hedging products.

The financial sector and financial institutions (FI) play a fundamentally important role in an emissions trading system. It is to be expected that most companies in China will trade with the help of intermediaries; only large emitters will trade directly at an exchange. Thus, FIs will be in a position to offer trading-related services, as well as advisory products, to clients subject to mandatory CO2 regulation.

Networking climate actions for stronger, international carbon markets

Vikram Widge's picture
Map of existing and emerging carbon markets and taxes, from State and Trends of Carbon Pricing

Around the world, countries are developing ways to put a price on carbon to fight climate change. They are choosing different approaches depending on their national circumstances. China has pilot emissions trading systems (ETS) in seven provinces and cities and is planning a national ETS in 2016. Chile recently approved a carbon tax to start in 2018. Mexico and Colombia are implementing sector-wide crediting mechanisms that reward low emission programs with carbon credits, for example in the transport sector by substituting conventional vehicles with electric cars. Many countries have renewable energy portfolio standards and feed-in tariffs.

These domestic initiatives are crucial to lowering greenhouse gas emissions. Each is being designed individually, though, creating a patchwork of regulations and missing the economy of scale that a connected system could bring.

The World Bank Group has been working on ways to network these initiatives and facilitate an integrated international carbon market.

Behind the numbers: China-U.S. climate announcement's implications for China’s development pathway

Xueman Wang's picture
Solar cell manufacturing in China

The past five weeks have given us what may be defining moments on the road to a Paris agreement that will lay a foundation for a future climate regime.

  • On October 23, European Union leaders committed to reduce greenhouse gas emissions by at least 40 percent by 2030 and increase energy efficiency and renewable energy use by at least 27 percent by 2030.
  • On November 12, during the APEC Summit in Beijing, Chinese President Xi Jinping and United States President Barack Obama jointly announced their post-2020 climate mitigation targets: China intends to achieve peak CO2 emissions around 2030, with best efforts to peak as early as possible, and increase its non-fossil fuel share of all energy to 20 percent by 2030; and the U.S. agreed to cut emissions by 26-28 percent below 2005 levels by 2025.
  • On November 20, at the donor conference in Berlin, led by the U.S., Germany, and others, donors pledged about US$9.3 billion to the Green Climate Fund (GCF).

China’s announcement in particular is considered by many to be a game changer. China, the world’s biggest emitter with its emissions accounting for more than 27 percent of the global emissions, is setting an example for other major developing countries to put forward quantifiable emission targets. The announcement will hopefully also brush away the “China excuse,” used by some developed countries that have avoided commitments on the grounds that China was not part of action under the Kyoto targets.

Nowhere to Go

Rachel Kyte's picture
"Tell Them"
Tell them who we are, says young Marshall Islands poet Kathy Jetnil-Kijiner. Her video was shown during the Small Island Developing States Conference.

In the weeks running up to the 3rd International Conference on Small Island Developing States, out of frustration and a sense that they must look after themselves, a new alliance was born: the Coalition of Atoll Nations on Climate Change. Or, as President Tong of Kiribati called it, the "alliance of the sinking". The coalition comprising Tuvalu, Kiribati, Marshall Islands, Maldives, Cook Islands, and Tokelau, with Micronesia associated as part of their territory, is atoll territory.
These nations have tried everything to bring their situations to the climate negotiators' and development organizations' attention and have their special situation recognized. With just 15 months until the Paris climate negotiations, they seek in a group to be able to support each other and to make themselves heard. 

Restoring Ocean Health Can Spur Blue Growth in the Islands

Valerie Hickey's picture

Healthy oceans provide food and income for island nations, including through tourism. Valerie Hickey/World Bank

Running from event to event to partnership dialogue here in the beautiful island of Upolu, Samoa, while listening to delegates to the 3rd annual Small Island Developing States Conference, two things ring loud and true: Small islands need ocean-based economic growth to diversify their economies, attract investment, grow their GDP, increase jobs, and end pockets of extreme poverty. And strong ocean-based economies need healthy oceans.
Great ocean states know this. They know that they cannot afford the boom and bust cycle that emerges as natural capital is liquidated and the ocean emptied and trashed. But small islands cannot forsake growth in the name of conserving natural resources either. We can fish the oceans empty; but we mustn’t. The future of growth, jobs, resilience all depend on the sustainable management of the resources of the ocean. For small islands, blue growth is critical; done smartly, blue collapse is avoidable.

Big Challenges, Small States: Island Nations Come Together for Climate Action

Rachel Kyte's picture

New community buildings in Samoa

On Sunday in Apia, the capital of Samoa, I saw the results of the World Bank Group’s work with coastal communities that were devastated by the 2009 tsunami and by Cyclone Evan in 2012.  Working with the Samoan government and partners, we built coastal roads and a new system of access roads that leads into the hills away from the seashore. Many families rebuilt their homes in the hills, and the new road system helps bind those new households together as well as providing safe escape routes should a tsunami or major storm hit the coast again.
The hard infrastructure construction is interesting; the community conversations about next steps for protecting the coastlines are even more so. The government is launching a series of community consultations that will bring together village mayors, women leaders, government agencies, and NGOs to decide how best to climate-proof their coastlines. The communities are set to decide if sea walls or mangrove plantations will best protect their land and livelihood.  

I’m in Apia with a team from across the IFC and the World Bank to represent the World Bank Group at the 3rd UN Conference for Small Island Developing States and took the opportunity to learn more about climate and disaster risk management at the community level.
For island nations, the small size of their land and their economies comes with a set of unique vulnerabilities that makes climate change a major determinant of their ability to thrive and in some cases even survive.