BEIJING, March 24 (Reuters) - China plans to launch a nationwide market to trade pollution permits within three years as part of efforts to tackle its environmental crisis, the Ministry of Finance (MOF) said on Monday.
The ministries of finance and environmental protection have submitted draft guidelines for a market to the State Council, China's Cabinet, which will make the final decision, MOF said in a statement on its website.
"We will facilitate cross-regional trading, especially among regions covered by the same air and water pollution control regimes," the statement said.
The market would cap emissions of key pollutants from major facilities and force those that exceed their caps to buy permits in the market, hence providing economic incentives for polluters to invest in cleaner technologies.
Pollution from China's coal-fired generators, energy-intensive heavy industries and ever-growing traffic has plunged the country into a deep environmental crisis in recent years.
Research has showed several hundred thousand people die prematurely every year from coal-related pollution, while in many urban areas the smog occasionally gets so bad that schools and public institutions shut down.
Premier Li Keqiang announced a "war on pollution" at China's annual parliamentary session earlier this month.
The MOF statement did not provide details on how the market would work, but it is likely to include sulphur dioxide (SO2) and nitrous oxide (NOx), two major pollutants.
Environment minister Zhou Shengxian said in January China planned to cut SO2 and ammonium nitrate by 2 percent over 2014, while NOx would be slashed by 5 percent.
Since 2007, 11 regions across China, including Jiangsu, Shaanxi and Zhejiang provinces, have launched pilot pollutant markets.
China's pollution-countering strategy mirrors its efforts to cut climate-changing greenhouse gas emissions. The government has picked seven regions to open pilot carbon trading markets, with a mandatory national scheme due to follow sometime between 2017 and 2020. (Reporting by Kathy Chen and Stian Reklev; Editing by Muralikumar Anantharaman)