As China lays down plans for a national carbon trading scheme, the world’s biggest emitter of greenhouse gases risks repeating mistakes made in carbon trading in Europe by flooding its pilot markets with free permits.
The European Union’s scheme, the world’s largest, suffered a collapse in prices hurting its credibility when the EU gave away too many permits just as the global financial crisis was slashing demand and in turn curbing pollution levels.
Fifteen traders, brokers and consultants speaking to Reuters said that most of China’s pilot markets launched last year were riddled with an over-allocation of permits, bar pockets of scarcity, such as parts of the Beijing market and the electricity generation sector in Shanghai.
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