The Pre‐2012 CDM Market in China Policy - Context and Current Developments

Since the adoption of the Kyoto Protocol in 1997 and its ratification in 2005, the carbon market has enjoyed steady and consistent expansion. The global carbon market in 2008 grew faster in terms of volume and value of traded credits. The total value was estimated at 92€ billion in 2008, more than double the 40€ billion in 20071. Both the EU and China are important players on the global carbon market. The EU is not only an important source of GHG emissions but has also been at the forefront of policy developments both domestically and internationally by developing a regional carbon market, the European Union Greenhouse Gas Emission Trading Scheme (EU ETS), and by pushing for ambitious emission reductions and renewable energy targets. In addition to internal efforts, EU member states and investors from the private sector are also the main investors in CDM projects and the main buyers of CDM Carbon Emission Reduction Credits (CERs). China, on the other hand is the largest producers of CERs2. As the most important supplier of CERs, both the current status and future development of the CDM market in China are of great interest and have significant potential impact for the international carbon market. This fact also has important implication for national as well as international climate policy making. At the same time, China needs to consider its position in the context of the international climate regime, in particular its relations with key actors and in any future post‐2012 climate agreement.The report assesses recent developments and experience gained from this rapidly developing area of EU and Chinese policy with a particular focus on the CDM. The report primarily targets policymakers and researchers in China and the EU