In 2011, China developed the 12th Five Year Plan, which creates a goal of a 21% reduction of carbon intensity for seven pilot cities, including Shenzhen, by 2015. To meet this goal, Shenzhen launched its own carbon trading market on June 18th, 2013, which allows companies and public infrastructure projects to offset carbon emissions under the Chinese Certified Emissions Reduction (CCER) programme.
At this stage, the main challenge for Shenzhen is regulating allowance allocation. This is difficult because CCER has not been introduced yet, so carbon products available on the market do not fit with all companies’ profiles. Additionally, the city lacks means to enforce the market’s rules, as fines and formal warnings are not always enough to get companies to adhere to their emission allowances. Furthermore, the companies themselves lack the knowledge and instruments to properly assess the impact of their own emissions as well as the business opportunities created by the market.
Steered by the Shenzhen Development and Reform Commission, the city carefully monitors the market at each step, including initial prices fixed by the city and frequent assessment reports. It aims to allow Shenzhen to reach its goal of becoming an environment friendly city, not just at the municipal level but also among businesses and citizens. The carbon trading market has a support function to generate responsible behaviours regarding carbon emissions. To this end, Shenzhen has created its own methodology tailored to its predominantly manufacturing industrial economy, and has initiated a strong advocacy campaign focused on the benefits of carbon trading. The allowances are based on carbon intensity, contrary to the framework for a carbon market that the European Union developed. The city bases the number of allowances on the results of the best performing companies and agencies. This generates a strong competition between companies and agencies, which will support the transformation of Shenzhen’s industrial sector into an emission-efficient one. In order to involve the local community, the city holds exhibitions and promotional campaigns to promote the uptake of a low-carbon lifestyle.
Because the carbon trading market is ongoing, projections are constantly changing along with the number of companies and public infrastructure projects involved in the programme. At this point in time, the market currently deals with 40% of the city’s total carbon emissions. Participants include 635 key companies (representing 26% of the city’s GDP and 31.73 MtC02e) and 197 large public infrastructure projects (1.55 MtC02e).
Given this data, the city projects a 30% reduction in carbon intensity by 2015.The market also aims to terminate the institutional building of the market in order to gain more visibility over market’s operations. Shenzhen expects the scope of transactions within the market to expand, and the programme, when implemented at full scale, to make the city a national and regional center for carbon trading, reducing the costs of mitigating the emissions of each company in the long run.