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While the world has waited with baited breath for large national emissions trading schemes (ETS) to kick off in the US and Australia, our Eastern neighbours are quietly exploring emissions trading as well.

Japan, of course, has been experimenting with national emissions trading since 2005, but recently emerging economies form East Asia are beginning to make their own forays in this direction as well.

One of the most promising of these is in South Korea. Just a few days after their announcement on Christmas Eve that they intended to cut 2020 emissions by 20% from 2005 levels, the Ministry of Environment announced that, from late 2010, the Korea Exchange will act as a platform for a three-year pilot ETS. This pilot phase will cover some 641 organisations and intends to cut emissions by 1-2% off the national 2005-2007 average. It is, furthermore, being explicitly designed with a view to linking with international carbon markets.

This represents just the latest stride forward for the country which dedicated 81% of its economic stimulus package to environmental spending.

Another trading scheme getting underway at the end of this will be based in China. The centre of this voluntary scheme will be the newly created Tianjin Climate Exchange, and will involve some 30 companies – including Bayer, Motorolla, and several Electric Utilities based near Tianjin city. Voluntary cap and trade has been explicitly endorsed by the Premiere Wen Jiabao, and backed with $150 million from the Chinese treasury.
China’s National Development and Reform Commission has been quick to dampen expectations of trading on a larger scale, though, fearing that this might imply China is capable of taking on national emissions caps.

Still, with assistance from the US EPA, this will be an important development in China’s capacity to effectively inventory domestic emissions.

Taiwan is another one to watch, with the Minister for Taiwan’s EPA, Stephen Shu-hung Shen, announcing plans for a national emissions trading scheme as the culmination of a three step plan to reduce the country’s greenhouse gases. Taiwan has recently enacted a suite of new energy and climate laws to accelerate decarbonisation and green growth and its Greenhouse Gas Reduction Act is set to be the first legislation of its kind for a developing country.

We will watch these emerging schemes with interest, in the hope that – as they develop – they heed the lessons that have been learned from the European scheme. Key lessons as highlighted by our recent briefing paper include:

– Start with the right sectors which aren’t exposed to international competition such as power, heat and transport
– Auction permits to avoid overallocation, to ensure an equitable distribution of pollution rights and to generate government revenues for green investment.
– Set ambitious targets which will ensure the environmental integrity of your scheme and produce a robust carbon price which advances progressive industries. Ignore the scaremongers.
– Retain the powers to intervene in the market to maintain its environmental integrity.
– Set aside permits to account for additional effort from conscientious citizens and make ETS data transparent to them

Above all, it should be remembered that the ultimate purpose an ETS is to affordably deliver reductions in carbon adequate to the climate challenge. The final measure of a trading scheme will be in the quantity of carbon it prevents from entering Earth’s atmosphere.