BlueNext, China Exchange Partner on Carbon Credits

By SHAI OSTER

BEIJING -- Environmental exchange BlueNext, Europe's largest spot market for carbon credits, is partnering with a Chinese exchange, as foreign companies bet that China will eventually allow some form of domestic or international emissions-trading scheme.
BlueNext said it will sign a memorandum of understanding with China Beijing Environmental Exchange to look at setting up a market for trading of carbon-emissions credits down the road.
"This is another step in our wish to expand our market into the great potential that is China, and the rest of Asia. But [it is] also another step in our long-held ambition to be the reference point for a single international price for carbon," said Serge Harry, chief executive of BlueNext.
Currently, foreign investors in pollution-reduction projects in China can create credits, called certified emissions reductions, that can then be applied against carbon caps in Europe or in other developed nations under the clean-development mechanism of the Kyoto Protocol on global warming.
But, under current regulation, those credits can't be traded domestically and have to be matched with a specific project abroad. They can be traded later in secondary markets overseas.
Mr. Harry said that under the agreement, BlueNext will have access to a database from China Beijing Environmental Exchange of potential projects that could generate carbon credits for investors.
In a statement, China Beijing Environmental Exchange said the alliance would open up access to more buyers for the projects.
So far China has relied on regulations rather than markets to curb pollution. But many are betting that China will loosen regulations and allow some forms of emissions trading. Last year, three cities -- Shanghai, Beijing and Tianjin -- launched emissions exchanges. One of China's biggest companies, state-owned China National Petroleum Corp., or CNPC, has joined with the Chicago Climate Exchange, owned by Climate Exchange PLC, to set up the Tianjin Climate Exchange.
With has no national emissions caps, China is the world's leading source of global-warming greenhouse gases and has been the source of more than 80% of the carbon credits traded globally. The process to create credits from Chinese projects, however, has come under criticism amid allegations that many of the projects don't meet the goals of the Kyoto agreement of reducing global warming gasses.
BlueNext is owned by NYSE Euronext and French state-owned Caisse des Dépóts et Consignations. China-Beijing Environmental Exchange was set up by the Beijing municipal government.
Write to Shai Oster at shai.oster@wsj.com