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Box 2.5: Auction of Carbon Emissions Quota
The EU ETS mechanism has covered the energy sector as well as high carbon-intensity
industrial enterprises. The annual carbon dioxide emissions from these two sectors
account for about half of all carbon dioxide emissions in the EU and 40 per cent of all
EU greenhouse gas emissions (carbon dioxide equivalent). Since its official launch
in 2005, the EU carbon trading system has gone through adaptation in the first
phase (2005–07) and is in the second phase (2008–12) featuring explorations and
improvements. Beginning from the third phase, EU ETS will fully strengthen and make
unified use of the carbon emissions quota auction mechanism and strive for reducing
EU carbon dioxide emissions by 21 per cent by 2020 compared to the level in 2005. In
addition to the EU carbon trading system, existing carbon trading systems or carbon
trading systems planned to be launched in the near future have also adopted a certain
degree of auction. For example, the Regional Greenhouse Gas Initiative (RGGI) adopted
the 100 per cent quota auction at its most initial stage; Western Climate Initiative (WCI)
adopted auction of at least 10 per cent of the carbon quota; New Zealand carbon trading
system, as a whole, took the form of auction and provided free quotas for industrial
sectors which may have carbon leakage; the carbon trading system that Australia plans
to implement in 2015 also stands ready to give priority to auction of carbon quotas and
distributes free emissions quota to high energy-consumption industries.
The domestic carbon market in China is expected to provide an impetus
to domestic enterprises’ emission reduction actions in the future. Also,
since enterprises are actively involved in energy conservation and
emission reduction activities, resources used by the local governments
for energy conservation and emission reduction are reduced to a
certain degree; as a result, the additional source of resources for local
governments to spend on other areas of the low carbon economy is
guaranteed. In addition, positive development of voluntary emission
reduction can generate CCERs for carbon market transaction on
the one hand, and promote transformation and upgrading of local
infrastructures and industrial construction technologies on the other
hand, thus, contributing to the development of local low carbon
economy and serving as a substitute for fiscal expenditure of local
governments.
Other Market-based Innovations
China’s financial market is not mature as a whole. Its carbon financial
market has just begun. Therefore, the government needs to learn from
international experience to encourage developments of carbon financial
products. At the current stage, the four continents of the world have
had their own hallmark carbon exchanges. Exchanges from emerging
108 Low Carbon Development in China and India
The EU ETS mechanism has covered the energy sector as well as high carbon-intensity
industrial enterprises. The annual carbon dioxide emissions from these two sectors
account for about half of all carbon dioxide emissions in the EU and 40 per cent of all
EU greenhouse gas emissions (carbon dioxide equivalent). Since its official launch
in 2005, the EU carbon trading system has gone through adaptation in the first
phase (2005–07) and is in the second phase (2008–12) featuring explorations and
improvements. Beginning from the third phase, EU ETS will fully strengthen and make
unified use of the carbon emissions quota auction mechanism and strive for reducing
EU carbon dioxide emissions by 21 per cent by 2020 compared to the level in 2005. In
addition to the EU carbon trading system, existing carbon trading systems or carbon
trading systems planned to be launched in the near future have also adopted a certain
degree of auction. For example, the Regional Greenhouse Gas Initiative (RGGI) adopted
the 100 per cent quota auction at its most initial stage; Western Climate Initiative (WCI)
adopted auction of at least 10 per cent of the carbon quota; New Zealand carbon trading
system, as a whole, took the form of auction and provided free quotas for industrial
sectors which may have carbon leakage; the carbon trading system that Australia plans
to implement in 2015 also stands ready to give priority to auction of carbon quotas and
distributes free emissions quota to high energy-consumption industries.
The domestic carbon market in China is expected to provide an impetus
to domestic enterprises’ emission reduction actions in the future. Also,
since enterprises are actively involved in energy conservation and
emission reduction activities, resources used by the local governments
for energy conservation and emission reduction are reduced to a
certain degree; as a result, the additional source of resources for local
governments to spend on other areas of the low carbon economy is
guaranteed. In addition, positive development of voluntary emission
reduction can generate CCERs for carbon market transaction on
the one hand, and promote transformation and upgrading of local
infrastructures and industrial construction technologies on the other
hand, thus, contributing to the development of local low carbon
economy and serving as a substitute for fiscal expenditure of local
governments.
Other Market-based Innovations
China’s financial market is not mature as a whole. Its carbon financial
market has just begun. Therefore, the government needs to learn from
international experience to encourage developments of carbon financial
products. At the current stage, the four continents of the world have
had their own hallmark carbon exchanges. Exchanges from emerging
108 Low Carbon Development in China and India
