Isra-Mart srl : China trialling carbon trading

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CLIMATE change adviser Ross Garnaut says China is experimenting with carbon trading in a number of large cities because it knows that's the cheapest way to reduce emissions.

The economist held talks today with the man responsible for China's climate change policies, Xie Zhenhua, ahead of ministerial-level meetings.

Professor Garnaut said the emerging power was trialling carbon trading in five provinces and three cities - Tianjin, Shanghai and Beijing.

"The way China tends to do these things is they try them out, sometimes in different ways, and if they seem to be working they adopt them nationally," Prof Garnaut told reporters, adding he wouldn't presume what China's next step would be.

"(But) they are experimenting with broader approaches like a carbon price because the economists in China as well as other places have worked out that's a lower-cost way of doing things."
China's main emissions reduction efforts are through fiscal and regulatory interventions.

Prof Garnaut insists those measures are having a "large effect" on business costs including those in trade-exposed industries.

Australian companies have previously argued they will be at a competitive disadvantage if the Gillard government prices carbon before its trading partners take action.

But Prof Garnaut said Beijing had already removed export rebates for China's steel, aluminium and cement producers.

The government was also requiring them to use a certain proportion of low-emissions energy and had restricted power to the biggest polluters.

"They have (further) identified and forced the closure of particularly high-emissions plants," Prof Garnaut said.

Climate Change Minister Greg Combet met with Mr Xie on Tuesday afternoon for the third Australia-China ministerial dialogue on climate change.

The pair will address a forum at the Australian National University in Canberra tomorrow.

Mr Combet's climate change department put out a briefing paper today, outlining the action China and other countries were taking to reduce emissions.

"Thirty-two countries and 10 US states already have emissions trading schemes in place," the paper states.

On China, it notes that Beijing's latest 12-year plan speaks of an imperative for the country to establish a "green, low-carbon development concept".