Citigroup and OAO Gazprom have signed a small but pioneering deal in China that may lay the foundation for a larger scale national market for carbon trading.
According to the CNY500,000 agreement, the American bank and the Russian gas giant will purchase energy-intensity credits from three Tianjin heating companies that have outperformed the energy efficiency targets set by the city government. It is said the energy they have saved will be packaged as carbon emission quotas and sold to other public units or buildings that have not completed this year's goals.
John Shi, the CEO of Arreon Carbon, a carbon credits broker from the UK, believes this is the first step toward building a fully implemented carbon-intensity market in China. Arreon Carbon, along with Tianjin municipal government and Tianjin Climate Change, a JV between China National Petroleum Corp and Chicago Climate Exchange, has secured the finalization of the deal.
Currently there are several carbon trading markets in China cities, but up until now, there is still no legal basis for carbon trading in the country. Among the cities with a carbon trading market, Tianjin has apparently taken the lead in attracting high-profile investors such as Citigroup, Gazprom and CNPC.