(BN) EU Helps China on CO2 Trade as Climate Summit Falters (Update1)


EU Helps China on CO2 Trade as Climate Summit Falters (Update1)
2010-12-07 14:34:10.307 GMT

(Updates with analyst Comment in fifth paragraph)

By Mathew Carr and Kim Chipman
Dec. 7 (Bloomberg) -- The European Union is setting up a
project to help China begin trading emissions in about eight
cities, a collaboration that transcends an impasse between rich
and poor nations over the future of the Kyoto Protocol.
A work program between the 27-nation bloc, which runs the
world's biggest emissions market, and China will cover
regulations, verification and registries that track ownership of
carbon allowances, Jos Delbeke, head of the European
Commission's climate unit, said in an interview yesterday at
global climate talks in Cancun, Mexico.
Consultations with China "are going much better than
anticipated," he said. The Chinese program, still in the
development phase, won't cover the entire nation from the start
nor include a so-called offset program for industries, the EU
official said. "There are going to be a number of cities and
provinces." The nation already has exchanges that might handle
emissions trading in Beijing, Shanghai and Tianjin, he said.
China said industrial nations should extend pledges to cut
greenhouse-gas emissions after the limits set by the Kyoto
Protocol expire in 2012, Xie Zhenhua, China's top official on
climate policy, said at a briefing yesterday in Cancun. That
could potentially create a global market. The U.S. has resisted
joining Kyoto without limits on China. Developing countries
under the 1997 accord still can choose to make "voluntary"
pledges to cut emissions, the Chinese official said.


China has adapted its strategy to cut carbon emissions
while building its economy, said Emmanuel Fages, a Paris-based
analyst for Orbeo, the carbon venture of Rhodia SA and Societe
Generale SA. Realizing the U.S. is blocked on climate action by
Congress, "China can be more open and have the luxury to corner
the U.S. internationally," he said. "Very soon, the U.S. will
be finger-pointed as the only big emitter not doing anything."
EU emission allowances for delivery this month dropped 0.6
percent to 14.78 euros ($19.75) at 10:45 a.m. on London's ICE
Futures Europe exchange. While the permits are up 18 percent in
2010, they are down 11 percent from this year's high in May. UN
emission credits dropped 0.9 percent to 11.57 euros on ICE. They
are down 20 percent from their high in May.
Even as climate talks falter, developing countries
potentially including Brazil "will move ahead with domestic
carbon market regimes," said Caio Koch-Weser, vice chairman at
Deutsche Bank AG and a member of the United Nations advisory
group on climate finance. "China, as part of its next five-year
plan, is quite advanced in its thinking," he said Dec. 5 at the
Green Solutions conference in Cancun.

Forecast for 2015

China will have a cap-and-trade system by about 2015 as the
world's biggest emitter takes a lead role in developing clean
energy, London School of Economics professor Nicholas Stern said
Dec. 5.
"There will be cap and trade in China within four or five
years," said Stern, who published a widely cited study of
climate-change economics for the British government in 2006.
China wants "to win the green race, and good luck to them," he
said Dec. 5 in conjunction with the climate talks in Mexico.
"This is the kind of green race that we need."

For Related News and Information:
Emission trading stories: TNI ENVMARKET CLIMATE <GO>
Top environment and renewable energy stories: GREEN <GO>
Stories about the climate talks: NSE CLIMATE CANCUN <GO>
Locations of global energy facilities: BMAP <GO>

With assistance from Catherine Airlie in London--Editors: Mike
Anderson, Bruce Stanley.

To contact the reporter on this story:
Mathew Carr in Cancun, Mexico at +44-20-7073-3531 or
Kim Chipman in Cancun, Mexico at +1-202-624-1927 or

To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net