Shenzhen is one of the fastest growing cities in the world with a population of 15 million and an annual GDP growth rate of 10%. Implementing an ETS scheme carried many challenges, including how to regulate the allocation of allowances as well as enforcing compliance. Additionally, the programme must account for the lack of knowledge of carbon trading markets amongst businesses which can leading to poor decisions, risk assessment and opportunity prediction. Staff mobility within these companies is large, meaning employees with expertise in carbon trading may leave after a short period. Moreover, accounting methodology and tax treatment for ETS are not explicitly defined.
Shenzhen has recruited 636 enterprises to partake in its ETS scheme. In this first 3-year period, those businesses involved showed a rapid reduction in carbon emission intensity, while maintaining steady economic growth. This indicates that the increase of industrial energy consumption and greenhouse gas (GHG) emissions normally associated with economic growth has been controlled. Green low carbon development of the city is now possible thanks to uncoupling GDP potential from GHG emissions.
Compared with 2010, the absolute carbon emissions of the 636 compliant enterprises has reduced by 5.31 million tonnes (16.9%). Meanwhile, the contribution of the enterprises to overall GDP (the industrial added value) of the 621 manufacturing enterprises taking part in the scheme increased by 55.8%. The carbon emission intensity reduced by 41.2% compared with the end of the “11th Five Year Plan”, exceeding the goal of 21% reduction of carbon emission intensity in the “12th Five Year Plan” of Shenzhen. The change in operating culture promoted by the scheme has led to Shenzhen’s only coal-fired power plant gradually reducing power generation in 2013 and 2014. This has contributed to a marked improvement in the atmospheric quality of the city.
The enterprises under the trading regulation scheme are expected to achieve the goal of 60-65% reduction of CO2e per GDP by 2030 (versus 2005) as scheduled.
Businesses participating in the scheme are motivated to transform and upgrade their operations in order to comply with, or sell on, their ETS allocations. This is expected to result in a reduction of other GHG emissions in addition to CO2. This will be, in part, achieved through the phasing out of high energy consumption equipment, such as Shenzhen’s coal power plant. In the long term, these changes should improve air quality in the city and yield corresponding public health co-benefits.