Environment China's Emissions Trading Strategy to Turn Contradictions of a Major Power into Resources (circa 2007)

Environment China's Emissions Trading Strategy to Turn Contradictions of a Major Power into Resources (circa 2007)

Around 2007, the international community was demanding specific measures to reduce greenhouse gas emissions as the first commitment period (2008-2012) of the Kyoto Protocol approached. Japan and the EU had made energy conservation and the introduction of renewable energy the pillars of their policies, and the U.S. had begun to introduce emission trading schemes (RGGI, etc.) on a state-by-state basis while foregoing reduction obligations at the federal level. China was rapidly increasing its presence in this environment.

Around 2006, China was recognized as the world's largest CO₂ emitter, surpassing the United States, and its explosive growth in energy consumption became the target of international criticism. Coal-fired power accounted for more than 70% of its energy supply, and air pollution in urban areas had reached a serious level. On the other hand, the domestic economy was growing at a high rate of around 10% per year, and as the "factory" of the world, the country was developing an export-driven industrial structure, which led to an unceasing expansion of energy demand. How to overcome this dual pressure of economic growth and environmental constraints was a life-and-death challenge for China.

Here, China actively adopted the Clean Development Mechanism (CDM) based on the Kyoto Protocol. This is a mechanism that allows developed countries to implement emission reduction projects in developing countries to meet their emission reduction obligations and purchase the results as emission credits. Hundreds of projects, including wind power, small-scale hydropower, waste methane recovery, and biomass power generation, have been deployed, accounting for nearly half of all CDM projects registered worldwide. As a result, China is expected to generate an estimated $3 billion in foreign currency income annually, paving the way for linking climate change measures to economic growth.

In addition, around 2007, the Circular Economy Promotion Law (enacted in 2008) and the Energy Conservation Law were introduced in the country, and industrial upgrading and energy efficiency improvements were incorporated into the national strategy. The funds obtained from emissions trading provided a boost to the development of renewable energy and the introduction of energy-saving technologies, and environmental measures were positioned not as a "constraint" but as a "source of growth.

Thus, around 2007, China reversed the contradiction under international pressure and incorporated the emission rights market into its economic strategy. This approach, in which environmental measures were seen as a new resource and used as a card in international negotiations, led to the "low-carbon city model" and the "national emission rights market (to be officially launched in 2021)," and formed the prototype for China's climate strategy to this day.