August 5th witnessed China’s first voluntary carbon credits trading. At the China Beijing Environment Exchange (CBEX), Tianping Auto Insurance Co (TPAIC) using RMB 277,700 (or $39,671), purchased 8,026 tons of carbon reduction credits generated from a public green commuting campaign during the 2008 Beijing Olympics. TPAIC intended to use amount of carbon credits to offset all its carbon emissions during operations from Year 2004 to 2008, thus becoming the first carbon-neutral corporation in China.

This deal symbolizes the fruition of the Green Commuting Carbon Credit Action, a program jointly sponsored by the China Association for NGO Cooperation (CANGO) with some media like Beijing People’s Broadcast Corporation, People’s Daily Net and Sohu.net, in collaboration with the Environmental Defense Fund based in the U.S since 2008.

Money from this transaction would be wholly donated to the Green Commuting Fund operated under CANGO. The purpose of the fund would be to continue to organize relevant activities that advocate for and promote reduction of carbon emission in China.

As the 2010 World Expo in Shanghai approaches, negotiation is underway with Shanghai EPA to launch similar Green Commuting campaign, following the example of this trading of credit collected during 2008 Beijing Olympics.

The carbon offset is the use of market-based mechanism aiming at a reduction in greenhouse gas emissions. Under the framework of the famous Tokyo Protocol, there are mainly two markets for carbon offsets, the compliance market and the voluntary market. All required companies, governments, or other entities purchase carbon credits in order to comply with the quota of carbon dioxide they are limitedly assigned, while the much smaller voluntary market provides extra environment-concerned entities to buy credits to mitigate their carbon footprints incurred from transportation, heating, etc.

Though a “non-annex I country” without carbon-reduction obligation, China set up the Beijing Environment Exchange (CBEX) to make it possible for voluntary trading. CBEX is the country’s first professional environmental equity trade institution authorized by the Beijing Municipal Government in August 2008. Since its founding, CBEX has taken the lead in establishing the registration and trading system of voluntary carbon reduction.

According to the statistics of the World Bank, about $5.5 billion of carbon offsets were purchased in the compliance market worldwide in 2006, and several million of carbon offsets in the voluntary market.

As Obama highlighted “reducing emission of greenhouse gases and addressing climate exchange around the world” in the China-USA Strategic Economic Dialogue in Washington on July 27th, the market of carbon credits will promisingly surpass the petroleum oil market around 2015. Hopefully this deal will serve as a good tryout for the sprouting of legal and structural framework for environmental equity trade in China.

(Compiled by Yongmei Shen at Harvard, based on Chinese article at http://www.cleanair.net.cn/pages/FG/newsContent.jsp?id=345. Edited by Xing Hu at Hauser Center at Harvard.)