The group has expressed hope that the market-oriented program, already implemented in some parts of China, will deliver more practical information to China's environmental protection decision-makers.

The State Environmental Protection Administration (SEPA) together with the United States Environmental Defence (EDF) taskforce last year began to apply the laws of economics to curbing acid rain.

EDF chief economist Daniel J. Dudek said that the practice, called emission trading, is based on existing caps that limit the amount of pollution produced by industrial sources, such as power plants and other factories. When emissions fall below the permitted level, the factory is allowed to store the excess quota for future use or to trade with other industrial units which cannot meet the pollution standard set by the environmental protection authorities.

The end result provides the buyer with an increased emission quota, a must for its future expansion, while the seller is rewarded for its contribution to environmental protection, he said.

Li Lei, a SEPA official in charge of pollution control said the practice of emission trading does not signal a green light to the generation of pollution.

Buyers and sellers are allowed to trade only within the State pollution control limits, a move that does not damage the local environment, Li said.

The pilot program between SEPA and Dudek's organization has been implemented in Shanghai, east China's Shandong and Jiangsu provinces, north China's Shanxi Province and Tianjin, central China's Henan Province and Liuzhou in south China's Guangxi Zhuang Autonomous Region with great success.

"The program has been conducted steadily and we have made important initial achievements," said Dr Zhang Jianyu, program manager of the China Emission Trading at EDF, which pioneered the successful emissions trading program in 1990 in the United States.

China's first agreement on sulphur dioxide emission trading reached by two power plants in different cities will come into effect this July.

Both plants, the Taicang Port Huanbao Power Co, Ltd, the buyer, and the Nanjing Xiaguan Power Plant, the seller, are in Jiangsu.

The former requires an additional sulphur dioxide emission quota as it plans to generate more electricity to meet local demands. The expansion plan will generate another 2,000 tons of sulphur dioxide a year, which is far beyond the original emission quota the company is permitted.

The latter, however, saves an emission quota of 3,000 tons per year, due to the state-of-the art technology introduced from Finland.

According to the agreement, the Taicang Port Huanbao Power Co, Ltd, will pay 1.7 million yuan (US$204,800) for an annual emission quota of 1,700 tons from the Nanjing Xiaguan Power Plant over the next three years.

(China Daily April 15, 2003)