The Implementation of the Clean Development Mechanism in China

Abstract: The Kyoto Protocol that aims to reduce the releasing of greenhouse gases is one of the most serious co operations on environmental issues with nearly 190 countries having signed it and 166 countries having ratified it. This means the treaty covers both industrialized and developing countries and one of the most important collaborations is found between these groups. China is a country with a very complex economical structure that is constantly changing due to strong growth and internal restructuring. It is still classified as a developing country which makes it eligible for the Clean Development Mechanism (CDM), one of the flexible mechanisms in the Kyoto Protocol concentrating on collaborations between developing and industrialized countries. The mechanism is built on the investment in clean technology in developing countries by industrialized countries in the exchange for certified emission rights (CERs). These can later be used by the investing country to meet its own obligation under the Kyoto Protocol. This essay will try to answer the question how the CDM has been implemented in China. This is done with the help of economic theory and a look at the economic situation in China today. Due to the intricate structure of the Chinese system it is difficult to draw any definite conclusion. But it is possible to say that according to theory, China lacks the appropriate tools for implementing emissions trading. Their system today is more appropriate for other policies such as imposing environmental fees. But there is a great will and potential in China for participating fully in international co operations and the country has made major changes in the recent history pointing towards a more open and dynamic economy. Based on this, it is very probable that China will fulfill its full CDM potential in the near future and eventually engage in full emissions trading.