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July 13, 2016

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Treading cautiously with carbon footprints

CHINA, which accounts for about a quarter of the world’s carbon dioxide emissions, has pledged to introduce a national carbon emissions trading system by 2017, with eight industries singled out to kick off the program.

Ahead of that start-up, seven areas across the country, including Shanghai, have been operating pilot projects in so-called “cap-and-trade” since 2011 consecutively.

Such systems, which have already been adopted in the European Union and California, set a cap on total emissions and assign quotas to companies and industries within that cap. Companies that pollute below their quotas may sell any surplus carbon credits to bigger polluters. Carbon dioxide is a main culprit in global warming.

Last year, under the pilot programs, about 40 million tons of carbon emissions were traded, valued at about 1 billion yuan (US$150 million).

The National Development and Reform Commission recently released a report that the average carbon prices in the pilot projects in the last three years have been 10 yuan to 40 yuan a ton. That is considered too cheap to propel a national strategy to promote emissions reductions. To create the green society envisioned for 2030, the price will have to rise to 53 to 252 yuan a ton.

The nation has been making efforts to popularize the system. However, participating companies reckon it hardly an incentive to upgrading technology but only a method of reorganization for traditional industries.

Chinese government will assign 10,000 companies across the nation with carbon emission quota starting next year, but traders and manufacturers expect the market will still be limited.

To involve advanced innovations in carbon trading, the government needs to know how big the companies can reduce their carbon footprint with the help of new technologies, said industry experts. Thus a calculating method of carbon emission should be developed and made for tailored company demand to measure their carbon surpluses.

Many companies in China seem wary about the program, unsure whether the government is following fast enough on new innovations and confused about what kind of energy-saving technology might reduce it.

Confusions among participants

Shanghai Jiaoyou Diamond Coating Co, which has developed a diamond die technology for making wires and cables more energy efficient, said the company currently isn’t selling its products based on their ability to reduce carbon footprints.

“It takes too long to go through all the regulation channels,” said Wang Xinchang, who works for company founder Zhang Zhiming. “Besides, who knows whether Chinese industries will care much about it or not?”

Working with graduate students from Shanghai Jiao Tong University, Zhang has focused on developing the diamond technology for several decades. He said carbon trading is still “too narrow a field” to wade into at present. He has devised no methodology to calculate the level of carbon emissions customers can save by buying Jiaoyou wires and cables.

Over 60 percent of the company’s customers come from abroad, including leading cable manufacturers Prysmian Group, Bekaert SA and the Sandvik Group. Although Jiaoyou Diamond’s product prices are more than fivefold higher than the industry average, buyers from around the world are interested in their energy-saving properties.

Prysmian told Zhang that the cables have helped the company reduce its carbon footprint under the EU Emissions Trading System.

Back home, Zhang’s technology hasn’t caught on, in part because the government hasn’t released enough details of the carbon-trading scheme to allow industries to measure or calculate their emissions and contemplate their options.

Li Chen, who co-founded a carbon trading fund management company called Shanghai Treasure Carbon New Energy Environmental Protection Technology Co, said traditional industries are more likely to be involved in cap-and-trade than new technology companies.

Indeed, the National Development and Reform Commission’s designated eight sectors to kick off the national emissions trading program are all pretty traditional industries and heavy coal burners: petrochemicals, power, chemicals, construction materials, nonferrous metals, steel, papermaking and aviation.

In China there are now 2,000 plants that have been assigned carbon quotas under the pilot programs. Li said his services have been sought primarily by solar energy plants, wind power companies, waste-burning electricity companies and clean coal power plants — all of whom are likely to have quota surpluses to sell.

China Tianying Inc, one of the nation’s largest waste disposal and energy-generation groups, is now expanding into venture capital related to carbon footprints.

According to a researcher at China Tianying who declined to be identified, the company is now looking at a polymer recycling company for possible acquisition and is monitoring the progress of a new process developed by Germany-based Covestro that converts carbon dioxide into plastic foam.

The carbon dioxide recycling technology began as a pilot project in Germany on June 17, with an investment of 15 million euros (US$16.6 million). Should the project succeed, the researcher said the company may bring the technology to China.

Reborn of an aborted project

Yuan Qi is the general manager of a company named Yiyong, which produces light-emitting diodes (LEDs) that are more energy efficient than incandescent lighting. The company, founded in 2008, was invited by the Shanghai government to install LED street lamps for Shanghai World Expo 2010, but the project never materialized.

The technology didn’t surface again until 2014, when the government of Fengxian District installed Yiyong LED lighting on a five-kilometer-long street.

According to the Shanghai Energy Efficiency Center, the project helps save 350 yuan a day in lighting costs. The LED lighting consumes only half the energy of standard incandescent lights.

Yuan is still skeptical about the prospects. The Shanghai government last year proposed that about 2 million street lamps in Pudong New District be converted to LEDs as an energy-saving pilot project.

It hasn’t happened yet.

“You just never know when it will,” Yuan said.

He added that action will be needed by the government to convince most industries to adopt energy-saving, low emission technologies in the future.

An officer at the Shanghai Commission of Economy and Information Technology told Shanghai Daily that the government has been somewhat hesitant to apply LED technology because they need more time to evaluate the system.

“What if the LEDs don’t work after two years’ use?” he asked. “What we are risking is not only the safety of residents but also the expense of the new system.”

On June 30, the Shanghai government reported that 51.1 million tons of carbon has been traded in the last three years of the pilot project, generating 621 million yuan of turnover.

However, most of the companies benefiting from the trading have been state-owned solar, wind, photovoltaic and clean coal power plants such as Shanghai Waigaoqiao No. 3 Power Generation Co, which sold 5,000 tons of carbon quota on the first trading day of 2013.

Feng Weizhong, the general manager of the power plant, said the revenue companies collect under the current trading mechanism is pretty minor, suggesting that the incentives for reduced emissions are still not sweet enough.


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