China Energy Industry

7bn yuan put on mainland emissions

South China Morning Post
August 31, 2006

Power plants must buy rights to emit sulfur dioxide from as early as next year – at an annual cost of 7 billion yuan based on current output – a senior environmental adviser to the central government revealed.

Beijing: Mainland power plants will have to buy rights to emit sulfur dioxide from as early as next year – at an annual cost of 7 billion yuan based on current output – a senior environmental adviser to the central government revealed yesterday. The proposal to charge 630 yuan per tonne for the emissions quotas – which would be tradeable – comes as Beijing seeks ways to cut emissions of sulfur dioxide by 10 per cent by 2010. The mainland is the world’s biggest emitter of sulfur dioxide, producing more than 25 million tonnes last year that caused economic losses of 500 billion yuan through acid rain, the mainland’s top environmental watchdog, the State Environmental Protection Administration (Sepa), estimates. Of the 25 million tonnes, coal- and oil-fired power plants accounted for 11 million tonnes.

The proposed quota price was revealed by Wang Jinnan, vice-president of the Chinese Academy for Environmental Planning, at a seminar in Hong Kong on emissions trading in China organised by City University. It is subject to consultation with provinces and the power sector. He estimates the scheme would see electricity prices rise by 8 fen per kilowatt-hour. Dr Wang, an adviser to Sepa, said the money raised would be spent on promoting renewable-energy development and energy efficiency. He said provinces had been assigned targets for sulfur dioxide emissions and they would be responsible for setting caps for power plants based on their previous emissions and capacity. Under the scheme, power generators will have to buy emission rights from the government to cover their expected output of sulfur dioxide. If their output is below the cap set by the government, they can sell spare quota – at market rates – to other polluters which have not met the government’s targets. Power firms that miss targets but opt not to buy more quota would be fined 4,000 yuan for every excess tonne of the pollutant emitted, it is proposed. All power plants would have to install continuous emission monitoring systems.

Dr Wang said it was hoped the policy could be launched next year. “The policy will be applicable to existing suppliers, with some allowances reserved for new market entrants,” he said. Wang Canfa , an environmental expert at the China University of Political Science and Law, welcomed the emissions trading proposal. But he said several issues needed resolving. “China does not have any national legislation on emissions trading so far,” he said. “It is very important that issues, such as how emission rights can be distributed in the very beginning, should be included in legislation.” Professor Wang said it would also be essential to give detailed instructions on the scope of emissions trading. “It is easy to understand the trading of emission rights of sulfur dioxide among different power plants in the same region. Is it also permitted [between] different regions?” Hahn Chu Hon-keung, environmental affairs manager of Friends of the Earth in Hong Kong, said it was worth exploring whether the city should introduce a similar system. The Guangdong and Hong Kong governments are discussing proposals for voluntary cross-border trading in quotas for emitting sulfur dioxide, nitrous oxides and respirable particles.

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