One man is scrolling slowly through his emails. Another is flopped across his desk doing a good imitation of being asleep.
It is a Wednesday afternoon at the China Beijing Environment Exchange, a centrepiece of China’s closely watched efforts to test carbon markets, and the action is not exactly frenzied.
“There are currently around two to three trades a day,” says Yang Wang, the exchange’s carbon trading centre director.
That is up from two or three a week in November, when Beijing became the third of four Chinese cities and two provinces to launch a pilot emissions trading system since June.
With more schemes on the way, experts say China will soon be regulating about 1 gigatonne of carbon dioxide, or nearly 10 per cent of the annual emissions that make it the world’s biggest carbon polluter.
As prices languish in the largest carbon market in the EU and Australia ditches plans for a carbon tax, environmental activists have seized on China’s efforts as proof that action to tackle climate change is far from dead.
However, nearly a year into the test run, the pilot schemes are provoking considerable bafflement and frustration among those trying to grapple with a carbon market with Chinese characteristics.
“It’s a black hole,” says one international carbon trading expert, explaining that the customary reluctance of officials to release information makes it hard to understand how market prices are being set.
Carbon markets, also known as cap and trade or emissions trading schemes, are designed to put a price on carbon dioxide, the main man-made greenhouse gas warming the atmosphere, to spur cleaner factories and greener investments.
Governments running such markets first calculate how many tonnes of carbon dioxide are emitted in their jurisdiction each year and then set a cap, or limit, on emissions.
They then create allowances, also known as permits and carbon credits, that are each equal to a tonne of carbon dioxide and together add up to the size of the cap, which is publicly disclosed. The allowances are auctioned off or given away to the companies that have to comply with the scheme. Each company has to surrender allowances equal to its annual carbon emissions, which are also publicly available.
Businesses without enough allowances can buy more from companies with spares, or on the open market, meaning allowance prices should rise and fall depending on whether companies are thought to have enough permits or not.
At least, that is the theory. When the EU launched its carbon market in 2005, it based its allocation of allowances on what turned out to be exaggerated company estimates of past emissions. Prices crashed from about ￠30 to nearly zero in 2007.
In China, officials have divulged the size of the overall cap in most markets, but not always the historic emissions data on which the caps are based, nor the precise number of allowances handed out. Even the names of the companies getting them is not always known, making it hard to understand exactly what is driving prices.
“Without that public information the pricing mechanism is quite opaque,” says carbon market analyst Hongliang Chai of Thomson Reuters Point Carbon.
Prices have been as high as Rmb130 in the southeastern city of Shenzhen; around Rmb20 in Hubei province and about Rmb50 in Beijing, often on very small trading volumes.
Liquidity is unlikely to increase unless people can understand market conditions better, says Jeff Swartz, international policy director at the International Emissions Trading Association.
“Right now the emissions trading markets in China are not able to supply that information but for them to achieve maturity, market participants need to know the fundamentals of supply and demand,” he adds.
Still, Chinese carbon market experts urge tolerance.
“People need to be patient,” says Qian Guoqiang, strategy director at SinoCarbon, a Beijing consultancy. In other countries, companies had to report their emissions data for several years, making it relatively easy to calculate what their caps should be, but China did not have this data, he says.
“We have a lot of work to do, but this is not important. What is important is that the pilot markets have begun, they are moving. In that sense, they are remarkable,” Mr Qian adds.
Xie Zhenhua, a vice-chairman at the powerful economic planning ministry driving the markets’ development, says the schemes are an important factor in China’s efforts to create a low carbon economy.
“We will try to set up a national carbon market by 2020,” he says.
This might be the world’s largest carbon market but, as so often in China, it also may be unlike any seen before.
这是北京环境交易所(China Beijing Environment Exchange)一个周三下午的一幕。该交易所是中国试水碳市场的一个核心机构，中国的这一努力备受瞩目，但进展得并不热烈。
汤森路透碳点(Thomson Reuters Point Carbon)的碳市场分析师柴洪亮说：“没有公开信息，价格机制是相当不透明的。”
国际排放交易协会(International Emissions Trading Association)国际政策主管杰夫?斯沃茨(Jeff Swartz)认为，除非人们能更好地了解行情，否则流动量不太可能增加。