China announces plans to launch cap-and-trade system

China’s visiting President Xi Jinping announced Friday that Beijing will establish a nationwide market for carbon, in which emission levels are capped and companies would have to pay for the right to pollute, part of an effort to help the country deliver on its climate targets and shift away from coal toward renewable sources of energy.

Environmental advocates welcomed the announcement, and held it up as an example for the United States, where efforts for a similar kind of so-called “cap-and-trade” system have floundered in Congress.

The announcement — made in a joint statement issued by Xi and U.S. President Barack Obama — comes ahead of climate talks in Paris in December, where negotiators hope to sign an international accord that would place limits on global carbon emissions.  China, the world’s leading polluter, has already pledged to reduce emissions once they hit their projected peak in 2030.

"We think this is a historic step," John Coequyt, director of the Sierra Club's international climate program, said of China’s announcement Friday.

Under the announced program, China will limit greenhouse gases and force industries to purchase pollution credits. It expands on seven regional pilot carbon trade programs that China began in 2011, according to Li Shuo, climate policy officer for Greenpeace China.

“First and foremost it will put a price tag on carbon,” Li said. “You don’t pay anything to pollute these days in China, and you will be paying something in two years’ time.”

The carbon price will apply to key sectors including power generation, iron and steel, chemicals and cement. Li said the announcement raises the question of whether the United States would also establish a national carbon market at some point.

“I think that’s a question U.S. politicians don’t have an answer for,” Shuo said.

In the U.S., establishing a cap and trade program would have to be done legislatively, and therefore, "we're not in a position to follow suit," Coequyt told Al Jazeera. He said that such programs could be enacted on a state-by-state basis, and that California had already established a carbon-pricing program.

As a part of Xi’s announcement on Friday, China will also commit $3.1 billion to the South-South Cooperation Fund, Coequyt said, a program set up last year by China and other developing countries to help such nations reduce carbon emissions and become resilient to the effects of climate change.

The U.S. had earlier pledged $3 billion to the U.N. green climate fund, which has similar goals. But Shuo said that pledge is still subject to Congress’ approval.

“China has pledged even more than the U.S. in this case, and particularly with China you will see this delivered. There isn’t a very difficult political process to get it approved  — but on the U.S. side you still have a lot of uncertainty,” Shuo said.

The effects of climate change are expected to hit developing countries the worst, with effects including more powerful storms, flooding and droughts. Funds donated by China, the U.S., and other developed nations are intended to help those countries adapt and grow their economies in a sustainable way.

China’s ambitious climate announcement is likely to be a boon for negotiations in Paris in December. The U.N. hopes national pledges for mitigating climate change will keep the global temperature rise low enough to avoid the worst effects of climate change.

Last week, U.N. Climate Chief Christiana Figueres admitted that the goal of limiting warming to 2 degrees Celsius (3.6 degrees Fahrenheit) will not be accomplished, based on various countries’ national pledges submitted ahead of the Paris talks. Instead, Figueres said the world would likely still be on a trajectory to see 3 degrees C warming by the end of the century.

In part to address that, China also indicated on Friday that it would work with the U.S., the world’s second leading polluter, to continue bilateral discussions to implement their mutual climate pledges after Paris, Coequyt said. In November, the U.S. and China announced a landmark deal that for the first time staked out a mutual commitment for emissions reductions, which most analysts viewed as a necessary first step toward any lasting global climate accord.

Xi on Friday suggested that nations continue to meet every five years after the upcoming global talks in December.

"Today was a big breakthrough for the U.S. and China, and sets things up very well for Paris," Coequyt said.

With wire services