China launches second pilot carbon trading platform

China launched its second pilot carbon trading platform on Tuesday in Shanghai, as the world’s largest emitter of greenhouse gases experiments with market-based systems for reducing pollution.

Almost 200 local companies have signed up to participate in the Shanghai Environment and Energy Exchange. Rules signed into effect by the city’s mayor earlier this month threaten fines of up to Rmb100,000 ($16,400) for companies that did not comply with emissions limits.

China’s air pollution is a topic of increasing discontent for its more prosperous urban citizens, and the country has unveiled a series of efforts to control pollution in coastal cities including cutting coal use.

Carbon trading exchanges allow companies that emit less than a set quota of carbon dioxide to sell the rights to the remainder of their quotas to companies who pollute more. In theory, the additional revenue stream will encourage companies to invest to reduce emissions.

Three deals, totalling 9,500 tonnes of carbon credits, cleared on the first day of trading at prices ranging from Rmb25 to Rmb27 per tonne.

That compares with Tuesday’s settlement price of Rmb72.76 on the China Emissions Exchange in Shenzhen, close to the border with Hong Kong, which debuted China’s carbon market in June.

A third exchange will launch in Beijing on Thursday. If successful the pilots could be merged into a nationwide carbon trading scheme later this decade.