European Union Emissions Trading Scheme: Institutional Lessons for China Ping CHEN, PhD Researcher Department of Public International Law Gent University

Outline 1.Implementation of 2003 ETS Directive: problems and lessons 2.Revised EU ETS Directive Lessons for the establishment of Chinese national emissions trading system Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

1. Implementation of 2003 ETS Directive: problems and lessons (Phase I ; Phase II ) Problems  Varieties of Member States policies (caps & allocation approaches)  The fluctuation of Carbon Price  Data issue (data of transferring allowances isn’t public) Lessons  Certainty and predictability  Reasonable flexibility  Transparency Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

2. Revised EU ETS Directive 2009 Centralization & harmonisation Cap-setting  A single EU-wide cap from 2013 onwards can be calculated on the basis of the target for 20% GHG emissions reductions by 2020 compared to 1990 level; Allocation approach  Total Auction, no more limitation;  A differentiated system between the power producing sector and the power-consuming sector; External links to KP flexibility mechanisms  A limitation on the use of imported credits. Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

3. Lessons for the establishment of Chinese national emissions from EU experiences 3.1 Possibility and necessity of establishment national ETS 3.2 The situation and practices of ETS in China 3.3 Lessons for Chinese national ETS Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

3.1 Possibility and necessity to establish a national ETS in China Possibility: [1] Political signals 17 th Congress Report; Chinese National Climate Change Programme [2] Institutions : The National Leading Group Dealing with Climate Change, Energy Conservation and Emission Reduction under State Council; Department of climate change under National development and Reform Commission (NDRC) [3] Pressure from Political Pledges and National Plans Reduction of carbon intensity 20% by 2010, 40-45% by 2020 [4] Existing Emissions Trading Programmes: SO 2 and CO 2 Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

3.1 Possibility and necessity to establish a national ETS in China Necessity: Uncertainty of CDM future in post-2012 International political pressure for mandatory emission reductions Urgent need to establish China’s own rules, improving negotiation capacity and international influences on price Improve energy use efficiency and acquire economic benefits by the implementation of ETS Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

3.2 The situation and practices of ETS in China [1] China’s first voluntary emissions trading standard:  “Panda” standard, December 16 th, 2009, Copenhagen, at a IETA Side Event on the 16 th December.  first voluntary standard to be created specifically for the Chinese market  a domestic voluntary GHG offset standard  x.html Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

[2] Trading Platform Establishment: Top-Three environment exchanges are located in Beijing, Tianjin and Shanghai  the government-licensed carbon-trading platform;

[3] CO 2 emissions Trading Practices: Beijing Environmental Exchange & Shanghai-based Tianping Auto Insurance: Buying 8026 tones of CO 2 saved from Green Actions for Olympic Games in 2008; Tianjin Climate Exchange & Ji-Feng Packaging & Paper Co. Ltd. Shanghai: voluntary carbon units of 6266 tones of carbon oxides in Voluntary carbon standard (VCS) APX Registry. Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

3.2 The situation and practices of ETS in China [4] SO 2 emissions trading programme: Legal Basis:  Revised ‘law on Prevention and Control of Atmospheric Pollution  Total Control Policy  local regulation or interim measures at local level based on the pilot practices Main contents:  Total Control Policy  Trading units: quotas  Trading partners  Supervisory institutions Drawbacks:  legal support at national level for SO2 emission trading  command-and-control mechanism Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

3.3 Lessons for Chinese national ETS [1] The establishment of CO 2 ETS Legislative hierarchy Legal nature of trade units  license to emit pollutants (National SO 2 system) Harmonisation Cap-setting  voluntary or mandatory Trading partner  company level or sectoral level Administrative authority  Role of Bureau of Environmental Protection or the third party/Environmental (property) Exchange Accurate Monitoring mechanisms Compliance and Implementation Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

3.3 Lessons for Chinese national ETS [2] Relation between the new CO 2 ETS and the existing SO 2 ETP Total control policy  Cap-setting policy; Applied traders  free traders; Command-and-control within limited region  initiative allocation; Price setting and negotiation  market-based instrument & abatement cost divergent; Function of environmental protection authority; Pilots in sectors  regional or sectoral pilots. Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

Conclusions  Bringing the experiences from SO 2 emissions trading programme to establish a framework of CO 2 ETS in the pilot regions or sectors;  Pushing forward both of the ETS with more market-based instrument and less command-and- control instrument with experiences from EU ETS. Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University

Thanks For Your Attention Thanks for your time Any questions? Ping Chen, Faculty of Law- Department Public International law & Maritime Institute, Gent University