During China’s 12th Five-year this summer, heads of state decided upon implementing a Carbon Emissions Trading or 碳的排放量交易 (tàn de pái fàng liáng jiāo yì) program by the year of 2015. This news, following a deadlocked US Energy Reform Plan, means that China is poised to become the industry leader in yet another green industry. Further, China is doing so independently from various international organizations and treaties (such as the Kyoto Protocol), meaning that the Chinese government will have greater control over policy as they try to reach their 2020 Carbon Intensity Project. If this industry flourishes in China domestically, it appears that such a program will spill over internationally into the rest of the world, bolstering China as a clean, green, GDP growth machine.

The carbon trading program would help China reach its goal of reducing carbon intensity by 40-45% by 2020, while stimulating low-use carbon methods of energy production or 能量释放 (néng liàng shì fàng) domestically. It would also strengthen a relatively weak stock exchange program, allowing for quick growth as the industry develops. China will also be able to use many of the domestic carbon credits internationally, thus bolstering revenue amidst restructuring of domestic energy companies in the next decade.

Considering just how much carbon China produces via coal, this seems like the perfect industry to kill two birds with one stone or 一举两得 (yī jǔ liǎng de). First, it mitigates the huge amounts of smog, and green house gases that choke the Chinese atmosphere. Second it, replaces the loss in GDP from reduction of cheap burning coal by creating credits that can be used to stimulate GDP growth in the new industry. This will create a compliment to the renewable energies sectors (such as wind and solar power) that incentivize collaboration between the two green industries.

In the long-term, the benefits of being the first to enter, establish and control global carbon emissions trading means that China will likely become a global industry leader in the exchange and pricing of carbon emissions. In a country where most renewable and green technologies are already first in the world, China stands to solidify its role as the global Green Dragon, selling Chinese clean-energy technologies to the US, EU and parts of the developing world. If this trend continues, China will be trading and exchanging carbon emissions with the rest of the world on it’s own terms–dictating price, policy and trade arrangements. After all, if Wall Street was able to make (and lose) billions of of derivatives, then China clearly can make a fortune off of trading carbon assets, which unlike derivatives, are tangible goods with actual value.

An update on Carbon Capping/Trading in China: