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Emissions control: China awaits the carbon trading revolution

CDM set to encompass sectoral approach; China likely to corner chunk of trading revenues

The Copenhagen summit failed to deliver the binding multilateral commitment many had hoped for. But the minutiae of carbon markets continue to be debated on a smaller scale, where – as with so much regarding climate change – the key country will be China.

The most important vehicle in carbon trading is the clean development mechanism (CDM). This is the deal struck under the Kyoto Protocol that allows industrialized countries with commitments to reduce their greenhouse gas emissions to invest in projects that reduce emissions in the developing world. This is the foundation of carbon trading: approved CDM projects generate credits, which can then be traded. The whole arrangement is overseen by a branch of the United Nations Framework Convention on Climate Change (UNFCCC). According to that group’s data, the vast majority of eligible projects so far have come from Asia: 1,398 out of 1,890 registered projects, the bulk of them in China.

Registered projects by region

Total 1,890

Source: United Nations Framework Convention on Climate Change


It has been clear from the outset that this has been an imperfect process that needs streamlining, as Lex de Jonge, chair of the CDM executive board at the UNFCCC, readily admits to Euromoney: "The entire CDM development has been a massive learning-by-doing process, to be frank about it, and we are still not there yet."