Carbon traders are backing China to revive a global emissions market that lost €34 billion (Dh166.33bn) last year as it shrank for the first time in history.
Investors from Climate Change Capital in London to Climate Bridge in Melbourne said this month they were seeking involvement in what may become the world's largest emissions market. Beijing's worst-recorded air pollution has renewed pressure on the government, which aims to cut carbon dioxide emissions by as much as 45 per cent before 2020.
Falling European Union and United Nations prices shrank the value of carbon emissions traded around the world by 36 per cent to €61bn last year, according to Bloomberg New Energy Finance.
Seven exchanges are scheduled to start pilot programmes this year in China, the world's most polluted country, establishing the biggest cap-and-trade programme outside the EU.
"Bad air quality will be putting a lot of pressure on the government to protect the environment," said Qian Guoqiang, a former Chinese climate negotiator and now the strategy director at SinoCarbon Innovation & Investment, a carbon consultant in Beijing. "China is very willing but not fully prepared to make carbon trading work because it is such a complex system."
Most of China's pilot programmes will tap foreign trading expertise by relaxing rules that would ban their participation, said Mr Qian, whose company counts Alstom, the French power-equipment maker, among its clients.
Foreign investors may be especially welcome in the trade of credits known as offsets, which China envisions as a successor to the UN's Clean Development Mechanism, said Milo Sjardin, the Singapore-based head of Asia-Pacific analysis for Bloomberg New Energy Finance.
China has almost half of the 4,200 projects registered worldwide supplying offsets in the UN system.
* Bloomberg News