If successful, the pilot programme will pave the way for a national emissions programme with the ambitious goal of cutting sulfur dioxide emissions by 10 per cent from the level in 2000 in three years.

The State Environmental Protection Administration (SEPA) will begin experimenting with the system in seven heavily industrial regions: Shandong, Shanxi, Jiangsu and Henan provinces, and the cities of Shanghai, Tianjin and Liuzhou, according to Li Lei, director of the division of air and noise pollution control under SEPA.

She said the government will give enterprises different quotas based on how much sulfur dioxide they usually emit.

While the quotas are fixed, enterprises can trade their pollution credits when fluctuations occur, Li said.

Sulfur dioxide creates acid rain, which has become a major environmental problem in China because of a heavy reliance on coal-burning electric power plants.

China has promised to cut sulfur emissions by 10 per cent by 2005. SEPA has partnered up with the United States Environmental Defence (EDF), who pioneered the successful emissions trading programme in 1990 in the United States, to model the trial programme.

"A remarkable transformation is occurring in China, and emissions trading will allow the Chinese to continue with economic growth while meeting national pollution limits," said Daniel Dudek, a senior economist with EDF who was credited by the former US President Bush with breaking the impasse.

Environmental awareness has grown tremendously in China in the last decade, and the creation of the emissions trading programme marks the country's strong commitment to cleaning up its air and curbing acid rain, Dudek said.

"EDF is helping China's experts adapt our 'toolkit' to their own culture, to come up with their own working model," he said.

To that end, Dudek and attorney Joseph Goffman recently led a national workshop with 100 environmental authorities from participating cities and provinces to provide training, guidance and idea sharing.

According to Dudek, this new initiative was built on earlier projects in two industrial cities, - Benxi in Liaoning Province and Nantong in Jiangsu Province. In Benxi, the EDF teamed up with city officials to draft tougher air pollution legislation based on the US acid rain model.

And in Nantong, EDF developed a demonstration trade system where light manufacturers expanded operations in exchange for contributing funds by selling quotas to a local power plant. The trading programmes for sulfur can also be applied to such greenhouse gases as carbon dioxide, Dudek said.

According to SEPA's work schedule, the environmental protection authorities of the pilot provinces and cities should draw up a work plan this month, Li said.

From July to May 2003, the pilot provinces and cities will carry out the programme according to the plan, to allocate emission quotas, to put into effect relevant rules, and to perform pilot trading.

Each enterprise participating in the programme will be equipped with monitoring systems on sulfur dioxide emissions to ensure fair trading, Li added.

(China Daily June 24, 2002)