China's Guangdong to set up CO2 market in 3-5 years: report

A construction worker crosses a street at a business district in Shenzhen, China's southern Guangdong province July 16, 2009.REUTERS/Bobby Yip

BEIJING (Reuters) - China’s booming Guangdong region aims to establish a provincial-level carbon market within three to five years in order to meet its mandatory carbon dioxide emission targets, state media said on Saturday.

The official Southern Daily newspaper said Guangdong, home to the densely populated and heavily industrialized Pearl River Delta region, would begin with a voluntary industrial sector carbon trading scheme as early as next year or the year after.

Guangdong, one of China’s most economically developed regions, said it was also planning to set up a cross-provincial carbon trading platform before 2020, the report said.

The southeastern coastal province needs to reduce its 2005 levels of carbon intensity -- or the amount of CO2 produced per unit of GDP -- by 30 percent in 2015 and 45 percent in 2020.

Last August, Guangdong was selected as one of 13 specially designated “pilot low-carbon regions and cities.” It was ordered to draw up CO2 reduction strategies and look into the feasibility of a local emissions market.

One scheme proposed by Guangdong will impose energy consumption caps on cities in the Pearl River Delta and allow them to trade energy permits with one another.

China has pledged to reduce 2005 levels of CO2 intensity by 40-45 percent by 2020, and it said at its latest session of parliament last month that the figure would have to fall 17 percent over the 2011-2015 five-year plan period.

Thousands of industrial enterprises were forced to shut down in the second half of last year as China’s industrial provinces rationed power supplies in order to meet 2006-2010 energy efficiency goals.

After admitting that such “administrative” methods were a mistake, China’s state planning agency has said it would rely more on “market mechanisms” like cap and trade in the next five years.

Reporting by David Stanway; Editing by Jeremy Laurence