A Study On The CDM Development Of Xiaojiahe Hydropower Station And The Establishment Of National Carbon Exchange

Climate change is, to date, of the most serious environmental issue ever faced by mankind. As reported in the third Assessment Report of IPCC, greenhouse gases emissions associated to human activities is likely the main cause for global temperature change in the past 50 years. If this scenario continues, by 2100, carbon dioxide level in the atmosphere would rise as high as 750ppm, subsequently, global average temperatures would rise 1.4～5.8℃comparing to 1990's record; sea level would also rise by 0.09～0.88m. If the global average temperature rose only by 2℃, the world would face many serious threats:disappearance of coastal cities, expansion of desertification, reduction of arable land, increase of pest and disease and hazards. Researches show that China's climate change trend is almost in line with the general trend of global climate change.Coping with global climate change not only involves scientific or technical fields, but also is comprehensively and directly associated with the society, economy, politics, international relationship, etc. Due to the globality of greenhouse gases, any single and local measures is difficult to deal with the threat of global climate change, and comprehensive, scientific, systematic and lasting actions should be taken by the whole global. Therefore, the international community formulated United Nations Framework Conventionon Climate Change (UNFCCC) in 1992. In order to achieve the goal of emission reductions set in UNFCCC, Kyoto Protocol agreed on three mechanisms, which were Clean Development Mechanism (CDM), Joint Implementation (JI) and Emission Trading (ET).The certification and transfer of Emission Reduction Units (ERUs) are not due to measures taken for the purpose of energy conservation and energy efficiency improvement, but the industry downturn. Therefore, Emissions Trading (ET) among Annex 1 countries is less and less. There are not so much cooperations of obtaining emission reductions from the other Annex 1 countries through investing projects by Annex 1 countries, so at present the role of Joint Implementation (JI) is also limited.Nowadays Clean Development Mechanism (CDM) rapidly becomes the main cooperation way of global greenhouse gas emission reductions. There are two main reasons. The first one is that, in order to obtain CERs for emission reduction commitments, developed countries provide fund and technology and implement emission reduction projects in developing countries, which simultaneously promotes China's sustainable development. The second one is that, CDM brings about an amalgamation of multiple functions by taking projects as a platform between Annex 1 countries and non-Annex I countries, including emission reduction technology (such as energy efficiency, renewable energy and biological carbon fixation technology, etc.), emission reduction policy (such as the integration of EU's mandatory quotas and CDM) and emission reduction market (such as the primary market and secondary market carried out between countries, regions, and enterprises).As a renewable energy project, Xiaojiahe hydropower station project will mitigate the demand and supply contradiction, improve the local and regional economy development, decrease reliance on fossil fuels, optimize the structure of power, abate the discharge of all kinds of pollutants caused from fossil fuel combustion, increase employment opportunities for local community, etc. The Project complies with the requirements of CDM and is registered successfully on UNFCCC website. As analyzed through Methodology and Tools approved by EB, it is estimated to generate emission reductions of about 1,359,449 tCO2e over the first 7-year crediting period, which can offset emission reductions undertaken by Annex I countries and decrease the marginal cost of carbon emission reduction in enterprises abroad.Xiaojiahe hydropower station project meets the standard that CDM establishes and has gained the license permission. However, some common and pressing problems came out in the process of development. If we, as the world's largest carbon supplier, can not solve the problems effectively and efficiently, it will discourage many investors from getting involved in such kind of projects and also have a negative influence on carbon emission reduction, which is implemented under the principle of "common but differentiated responsibilities" in the Kyoto Protocol.The establishment of the National Carbon Exchange has a profound theory basis and realistic meaning and will lead a further step to set up a uniform carbon trading system across the nation, and it will also be an effective measure to resolve problems in the Xiaojiahe project, change the current mess in the trading market, enhance the international competitiveness of carbon trading in China and promote greenhouse gas emission reductions.In order to establish the National Carbon Exchange, external legal system should be built, such as developing low-carbon economy in China and cultivating carbon trading market. The internal system should also be built, such as location of the National Carbon Exchange, selection of the originator, organization structuring, basic functions, trading rules, business models, membership management, financial management and execution system of verification and insurance.We also intend to set up local carbon exchanges. Under the leadership of the National Carbon Exchange, a parallel relationship will be formed between them as a whole.The carbon trading element should be configurated reasonably by National Carbon Exchange. In a certain period domestic business should be based on transforming the target of emission reduced by 40%-50%per GDP to total amount control, and international business should mainly focus on CERs and VERs, guide transaction objects to reduce trading cost under the principle of additional carbon transaction costs and carry out correspondent measures on different situations under the guideline of operational mechanism.On the matter of location selection of National Carbon Exchange, Wuhan City takes its advantages. As a carbon trading market both domesticat home and aboard it has affluent trading experience and enjoys government favorable policies especially that China intends to build a resource-saving and environment-friendly society. By the term of geography it is in the central part of Mainland China. On the top of that Wuhan is an industrial base and owns rich water resources and biomass resources.There is possibility that we face risks to establish the National Carbon Exchange which tax policy and CDM system bring. However, we can combat the risks through the right ways. In this case we will build up a competitive trading system and make a contribution on enhancing greenhouse gas emission reduction and sustainable development.