Shenzhen became the first Chinese city Tuesday to implement a carbon trading scheme to help curb greenhouse gas emissions, launching a cap-and-trade pilot program that officials hope will be an effective model for other Chinese cities in the years ahead.

According to Tang Jie, a vice-mayor of Shenzhen, the first carbon transaction price was around 30 yuan ($4.90) per ton, almost half the price in California in the US.

China is the world's largest emitter of greenhouse gases, which contribute to global warming. Air pollution continues to be a significant problem in many Chinese cities, and Chinese authorities have been exploring market-based mechanisms to limit pollution while not substantially harming economic growth. Beijing, Shanghai, Tianjin, Chongqing, Guangdong and Hubei are slated to begin similar carbon trading programs over the next year.

According to official and media reports, Shenzhen's scheme will cover 635 different companies, each of which will be given a set amount of pollution permits. If companies emit less pollution than the allotted amount, they can trade their permits away, while if they wish to exceed the government-­mandated pollution levels, they must purchase additional permits.

"The launching of the carbon trading program in Shenzhen is sending a positive signal to the world that China is willing to devote more efforts to environmental protection through this financial mechanism to solve the environmental problem," said Wang Zhen, the deputy dean of the China Energy and Sources Strategic Research Institute.

Lin Boqiang, director of the China Economy and Energy Resource Center of Xiamen University, said that the beginning carbon trade price of 30 yuan per ton indicates the conservative attitudes of the enterprises.

"Since the price was relatively low and only three of eight transactions were fulfilled between enterprises, the remaining five transactions were individual trades," Lin said. He predicted that the trading price will surge in the future.

Xinhua News Agency reported that initially, the carbon trading scheme is focused largely on the construction industry and particularly on large companies in Shenzhen.

The local government will also research and collect data from the public transportation system - such as buses and taxis - and use these sectors to spearhead the application of renewable energies.

Hongliang Chai, an analyst at Thomson Reuters Point Carbon, said in a statement, "While the official list of covered companies is yet to be published, big names such as PetroChina, CNOOC, China Resources and Huawei will probably be covered due to their business in the city, which has a population of over 10 million."

The local government of Shenzhen did not wish to comment on the program.

But Wang said the government will play an important role as a third party whose "checking and supervising (the program's) transparency and implementation is rather indispensable."

Global Times