Hunan's first emissions exchange shows promise

Hunan Governor Xu Shousheng (center) paid a visit to the engineers on the construction site of the Loudi Section of the Shanghai-Kunming Railway in Loudi on May 10. Photos Provided to China Daily

Zhaoshan is in the center of a metropolitan cluster comprising Changsha, Zhuzhou and Xiangtan. It is expected to become an eco-tourism hub.

Not long ago, Zhuzhou, a city in Central China's Hunan province, was among the nation's most polluted, but residents of this haven for heavy industry can see a blue sky on the horizon due to the success of the province's first emissions exchange.

Since it was set up in September, the exchange has greatly reduced air and water pollution, improving quality of life for locals, according to the city government .

"If the emissions of any company exceeds the amount they buy, they will pay a huge price for it," said Bao Xiaofeng, director of the emissions exchange for major pollutants in Zhuzhou, the first in the central Chinese province of Hunan.

Zhuzhou is one of Hunan's first batch of pilot cities that are allocating emissions permits for principal pollutants. It finished its initial allocation of sulfur dioxide and chemical oxygen demand permits by the end of 2011.

The permits were meted out to 669 local enterprises from nine heavily polluting industries, such as chemicals, petrochemicals, thermal power, steel and paper manufacturing.

Of those, 519 companies applied for an allocation equivalent to their total emissions for the year as of August 2011.

In total, the companies initially paid 11 million yuan for the permits.

In addition, 32 of those that did complete the process of applying for permits have been closed down for heavy metal pollution.

These companies will be required to buy emissions permits from the exchange equivalent to the amount of pollutants they will emit for the next five years, starting from 2011.

The emission permits price of sulfur dioxide is 144 yuan per ton, and it is 168 yuan per ton for the chemical oxygen demand.

The total emissions cannot exceed the permits the firms have bought.

If they need to increase their volume of emissions, they have to buy more permits from those who require fewer permits, or they have to be shut down, Bao said, adding that a private transfer of permits between firms cannot be done.

They all need to buy more permits through competitive bidding at the exchange.

"In the future, the total number of permits, which is set by the local environmental protection bureau, will grow smaller year by year," he said. "Firms that generate heavy pollution in production but don't take measures to reduce it will go nowhere but out of business."

The emissions exchange has worked well since it opened. For example, a private company bid for 0.4 tons of chemical oxygen demand for the next five years at the price of 3,640 yuan, giving the firm a chance to go on working.

The implementation of an exchange for principal air pollutants will encourage more companies to adopt advanced technologies to reduce emissions, thus protecting the environment at the lowest cost to society, Bao said.

Some companies may pay a high premium for the pollution they produce, while others will profit by using effective measures to reduce emissions and sell their excess permits.

During the launch of the exchange's pilot program in April, a thermal power plant of China Datang Corporation sold 5,000 tons of extra sulfur dioxide emission permits saved through the adoption of advanced technology under the 11th Five-Year Plan period (2006-10).

Two other local power plants bought 3,000 tons from the emissions exchange at a price of 19.5 million yuan.

The profit made by the company in the sale will give them more incentive to further improve their technology.

Also, this market-based approach makes the trades fair and open.

Since the pilot program on pollution reduction started in Hunan in 2010, a series of measures have been implemented, including the emissions exchange and new charges on medical waste.

After two years of efforts, Zhuzhou is no longer listed among the 10 most polluted cities in China.

In the city, there are now fewer companies from the six energy intensive industries than before.

The amount of companies in these industries decreased as a proportion of all companies with an annual income of more than 20 million yuan by 6.4 percent in 2011 compared to four years earlier.

The non-ferrous metal industry, including exploration and processing, has enjoyed a long and stable development for a century in Hunan, a province known for its rich resources in non-ferrous metals and nonmetallic minerals.

"It drove local economic development for a long time, but it also brings about severe environmental pollution," said Xu Shousheng, provincial governor of Hunan, "To pursue sustainable economic growth and improve people's lives, we need to find a green way to protect the environment and conserve the resources."

"To this end, we will allocate more funds to reach this goal, such as releasing policies for less-developed western areas in Hunan. The priority of this area will be to protect the environment," he said.

Contact the writers at fengzhiwei@chinadaily.com.cn and zhengjinran@chinadaily.com.cn

(China Daily 11/10/2012 page8)