ADB to help Shanghai design CO2 market

BEIJING (Reuters Point Carbon): The Asian Development Bank is this month expected to approve a $500,000 project to help the Shanghai municipal government develop its carbon emissions trading scheme.

Shanghai, China’s richest city, last month released draft rules for its CO2 market, which will impose emission caps on some 200 companies across 17 sectors.

But the government has asked Asia’s main multilateral bank for assistance in developing carbon finance products for the emerging market.

Rules and regulations for spot, option and forward contracts, carbon-related bonds and insurance products are all on the drawing board, according to background papers on the ADB website.

The scheme, which will cover sectors such as power production, and cement, iron, steel and paper manufacturing, is one of seven Chinese pilot markets due to be launched next year ahead of a national ETS later this decade.

However, several of the pilot regions have warned that their schemes may start later than planned, as they will be unable to finalise key details by the end of this year.

Shanghai, along with Beijing and Tianjin, are among the cities hopeful of being able to launch in January 2013 according to plan.

Shanghai is one of China’s fastest growing economic centres, and if new policies aren’t introduced, its CO2 emissions are estimated to grow from current levels of 188 million tonnes per year to 330 million tonnes in 2020.

As part of China’s overall target to reduce its emissions per unit of GDP to 40-45 percent below 2005 levels by 2020, Shanghai has been asked by the central government to cut its carbon intensity 19 percent from 2010 levels by 2015.

That carbon intensity target is likely to guide the cap on emissions that will be handed out to the ETS participants next year, but the local government has yet to reveal the specific ceiling it will introduce on CO2 output.