China Test Markets May Help Set Emission Cuts, GreenStream Says

Karl Upston-Hooper, general counsel at GreenStream Network Plc in Helsinki, comments on emissions trading in China, including the nation’s seven test carbon markets and offsetting program called China Certified Emission Reductions, or CCERs. He spoke by phone on June 14. China started today its first test carbon market in Shenzhen.

On how China will use its test markets to help determine a trajectory for its own emissions output after 2020:

China negotiators will travel to a key United Nations climate conference in Paris near the end of 2015 “knowing what they can achieve. Environmental problems are a potential disruption to social harmony. The government knows it.”

On whether China is genuinely embracing carbon markets:

“I don’t think it’s a sham or a facade. I’ve got a very positive impression of Shenzhen’s program.” The test programs “are not going to burst into life as a liquid, functioning market.”

On China’s preference for spot trading:

“The problem with having a spot market is you have no long-term price signals. I can’t lock in the price of carbon. In the EU, I can hedge.”

On challenges:

China will face setbacks as it sets up a system that links its programs, transitions to a national market and allows outside traders to participate, Upston-Hooper said.

On trading:

GreenStream expects it may after about 2015 be able to sell some of the 3 million metric tons of CCERs it’s already arranged to buy to emitters including in Shenzhen, Upston-Hooper said. CCERs will become “a currency that links the pilots. We’re a firm believer there will be in due course a functioning carbon market in China.”

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