Shanghai To Fine Firms For Breaching CO2 Market Rules

15 Jul 2013 10:13 Last updated: 15 Jul 2013 13:37 BEIJING, July 15 (Reuters Point Carbon) – Shanghai companies that fail to surrender enough government-issued carbon permits for each tonne of CO2 they emit under the city’s Emissions Trading Scheme face government fines of up to 100,000 RMB ($16,000) and will be forced to buy permits in the market, according to draft rules released by city lawmakers. Shanghai plans to launch an emissions market before the end of the year, capping carbon dioxide emissions from 200 companies across a broad sector of the city’s economy, including big energy users such as Bao Steel, energy companies such as PetroChina as well as China Eastern Airlines. The city is one of seven designated regions in which the central government is trialing emission markets before rolling out a federal scheme later in the decade in a bid to rein in pollution and greenhouse gas emissions and improve energy efficiency. The release of draft rules on Friday reveal for the first time how lawmakers intend to enforce environmental laws on companies responsible for pumping out about 110 million tonnes of carbon dioxide each year. “It is urgent to make clear rules on the basic issues as for carbon trading…. (the rules) will provide strong legal support and protection to carry out the pilot ETS,” the draft rules said. As well as fines for companies failing to surrender permits, companies that obstruct independent auditors in reporting emissions face penalties of up to RMB50,000 per breach. Emitters will be able to reduce the cost of complying with the scheme by offsetting up to 5 percent of their emissions by buying carbon credits, known as Chinese Certified Emission Reductions, from domestic projects that cut emissions. The rules, which were published on the local government’s website on Friday, still need to be ratified by government officials before becoming law. China, the world’s biggest emitter has been plagued by environmental problems associated with its rapid increase in coal consumption, with smog engulfing many of its cities located across the eastern seaboard. To improve energy efficiency the nation has a target to cut the emissions intensity of its economy – emissions per unit of GDP – by up to 45 percent by the end of the decade. To help it meet that goal, Shanghai plans to cut its carbon intensity by 19 percent below 2010 levels by 2015 and wants to curb 2013 energy consumption below 118.4 million tonnes of standard coal equivalent, increasing by 4.18 percent year-on-year. The city of Shenzhen was the first region in China to launch a carbon market in July, with permits changing hands at about $4.50-5.00 each, roughly the same price as those in Europe. By Kathy Chen – kathy.chen@thomsonreuters.com and Andrew Allan Taylor Scott International