BEIJING (REUTERS) - China's Hubei province will issue 300 million carbon permits a year under its emissions trading scheme, local media reported on Thursday, meaning the fast-growing economic hub will host the world's third-biggest CO2 market when it launches this year.
The province, home to 57 million people, will be the sixth Chinese region to launch a carbon market as Beijing attempts to slow its rapidly growing greenhouse gas emissions, blamed by scientists for causing climate change.
China aims to cut its emissions per unit of GDP to 40 to 45 per cent below 2005 levels by 2020 and has said it wants to use market mechanisms to meet the target.
To succeed, it is considered essential to slow emissions growth in industrial centre's such as Hubei. The province's economy grew by 11.3 per cent in 2012 to US$357 billion (S$451 billion), roughly the size of Thailand's GDP.
Among the 153 companies that will have their carbon emissions capped under the scheme are Wuhan Iron and Steel Group , Huaxin Cement and Hubei Energy Group . The scheme is planned to start in the first quarter of the year.
To boost liquidity in the regional market, private investors as well as foreign trading houses will be allowed to trade Hubei carbon permits, according to Mr Wang Hai, vice-general manager at the China Hubei Emissions Exchange, which will host trading under the scheme.
The province is planning a 100 million yuan (S$20.86 million) reserve fund that can intervene in the market if the price goes too high or too low.
"We have collected sufficient capital and are working on details," Mr Wang told Reuters.
Of the 300 million permits, 90 per cent will be handed out to the companies covered by the scheme. The government is still considering whether to issue free permits or charge 3 per cent of the cost, as in the southern Guangdong province.
The final 10 per cent of the permits will be set aside for new entrants and in government adjustment reserves, Mr Wang said.
With an annual cap of 388 million permits a year, the Guangdong market is China's biggest, but Hubei will be larger than schemes in Beijing, Shanghai, Shenzhen and Tianjin.