Clean-tech firms profit from China’s C02 permit market

Sensemaking / Clean-tech firms profit from China’s C02 permit market

The debut of world’s second-largest C02 emissions market and a shakeup of environmental legislation boosts Beijing’s green ambitions.

By Futures Centre / 18 Feb 2014

Firms dealing in pollution control and sustainable construction are set to profit from government initiatives in China that aim to reduce the country’s carbon footprint. According to a recent Reuters report, the Ministry of Environmental Protection will also be granted new powers to enable it to crack down on law-breaking polluters, bolstering Beijing’s attempts to encourage investment in its green industries.

In December China’s largest province, Guangdong, introduced the second-largest C02 emissions trading scheme in the world, trailing only the European Union in terms of the amount of carbon dioxide covered. Together with other regional schemes launched last year in Beijing, Shanghai and Shenzhen, China hopes this will help to reduce its greenhouse gas emissions per unit of GDP to 40-45% below 2005 levels by 2020.

On its debut, the volumes in Guangdong's carbon permit market surpassed full-day totals for the launches of the country's three other carbon exchanges. The 120,000 permits – each one initially priced at 60 yuan (£6) and representing one tonne of carbon dioxide – sold out within 20 minutes.

“Natural gas utilities are likely to benefit from the migration from coal – companies like ENN and Beijing Enterprises”, says David Li, Asia Pacific Head of Strategy at Impax Asset Management. “In terms of sustainable building, Xinyi Glass, which creates low emission glass for green buildings, Green Electric, with its energy-efficient air conditioners, and Epistar, with [its] LEDs, are set to gain from these new emission trading schemes.”

Wind power developers Longyuan and Huaneng Renewable could also see high returns and long-term benefits from the scheme. Foreign companies are expected to profit too. In fact, environmental equipment producers such as the UK’s Atkins and Fuel Tech, and the US firm LP Amina, are reportedly struggling to keep up with demand in the Chinese clean-tech market, which is estimated to be worth US $555 billion by 2020.

According to the International Energy Agency, China has the largest coal-fired power plant fleet installed in a single country and the youngest generators currently in operation – an ideal retrofitting scenario. Coal currently accounts for more than two-thirds of China's primary energy consumption, but the Government is keen to reduce nitrogen oxide (NOx) pollutants from power plant emissions, and is offering subsidies to get firms on board.

LP Amina, which produces equipment to reduce emissions from coal plants by retrofitting burners, has already doubled its sales to China this year, according to the firm’s marketing manager Jamyan Dudka. He believes it will cost around $11 billion to retrofit all of China's power plants over a 5-year period.

In another sign of increasing global investment in the Chinese clean-tech market, Doug Bailey, CEO of the US-listed firm Fuel Tech, a developer of air pollution control technologies and solutions, says the company has boosted its China-based staff by more than 30 people in order to make the most of the opportunities on offer. – Peter Shadbolt 

Photo credit: liaokong/iStock/Thinkstock

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