Shanghai completed its first pollution rights transaction on Feb 11, marking a milestone in establishing a mature pollution rights trading market by 2030.

In the deal, Shanghai Zhenhua Heavy Industries Co Ltd's Changxing branch transferred 8.3 tons of volatile organic compound (VOC) emission rights to Shanghai Changxing Metal Finishing Co Ltd for 10,000 yuan ($1,448.85) per ton per year over a five-year period.

"Although the initial transaction volume may appear modest, its significance is profound: for the first time, pollution rights have been translated into tangible economic benefits," said Yao Weifeng, executive general manager of Shanghai Zhenhua Heavy Industries Changxing branch.

The buyer, Shanghai Changxing Metal Finishing, a subsidiary of Hudong-Zhonghua Shipbuilding Group Marine Equipment and Accessories Co Ltd, will use the additional emission quota to support its expansion.

By establishing the pollution rights trading market, Shanghai aims to incentivize enterprises to invest more in environmental protection and emissions reduction, instead of solely relying on administrative measures to control industrial pollution.

"This demonstrates that the marginal impact of administrative measures alone is diminishing. We need to rethink our approach and fully leverage the market's role in resource allocation to stimulate enterprises' intrinsic motivation for emission reduction," said Tang Chendong, deputy director of the Shanghai Municipal Bureau of Ecology and Environment.

The city plans to gradually expand both the scope and the categories of pollutants covered by trading.

In its initial phase, the pollution rights trading system will focus on major polluters and new construction projects requiring additional emission quotas.

Shanghai has approximately 1,200 industrial enterprises under key pollution management, accounting for about 37 percent of licensed industrial companies.

Estimates indicate that around 100 new projects in the city will need to purchase emission rights annually, with an annual trading volume of about 25 million yuan.

Source: Shanghai Observer