CHALLENGES FOR NATIONWIDE MARKET

While they hailed the pilot schemes as a landmark step for China in building a nationwide market, experts said fundamental problems should be resolved before a market mechanism for curbing greenhouse gas emissions can be called a success in the country.

"We want a law on carbon emissions trading and low-carbon development as soon as possible," said Li Junfeng, head of China's National Climate Change Strategy Research and International Cooperation Center.

He said administrative means have limited influence in raising people's awareness. With a legal bounding, companies will learn their rights and duties more clearly.

"A law on climate change will enable government departments and public sectors to have a clear-cut division of work on the issue," said Wang Yi, deputy director-general of the Institute of Policy and Management with the Chinese Academy of Sciences.

Apart from legislature, Wang and his fellow experts appealed for the government to determine China's total allowed carbon emissions.

The country has pledged to reduce carbon dioxide emissions by 40 to 45 percent per unit of GDP by 2020, compared with the levels in 2005.

"Without setting a figure for the intensity cut, or a date by which China's total emissions would start falling, we cannot allocate quotas scientifically," said Wang, who added that only when carbon emissions quotas become a scarce resource will companies be willing to trade for it.

However, Wang also admitted that setting a figure for a developing country that still relies heavily on energy-consuming, high-polluting industries for economic development and poverty relief, determining a figure is not as easy as it seems.

Pilot carbon emissions markets currently allocate quotas to enterprises according to their historical carbon emissions.

"How to monitor companies' carbon emissions and which organization can we appeal to when we are unfairly treated in emissions trading or quota transfers, are all to be decided," said Huang Yaping, vice board chairman of Huaneng Coking Gas Co., Ltd.

"It seems unfair that companies that emitted less pollution historically could receive stricter requirements. But we have to consider whether those that polluted more can afford substantial emissions reductions in a short period of time," said Su, adding that reducing emissions is a long-term task for these enterprises.

How to introduce carbon finance, or the creation of financial instruments that are tradable on the carbon market, is another important issue, said Li Junfeng.

He said the government should be cautious not to let speculative investment result in negative price spikes while still introducing financial instruments to the market.