Chinese President Xi Jinping made his commitment to introduce a nationwide cap and trade program to limit greenhouse gas emissions. However, the effectiveness of the emissions trading system, now being used by seven Chinese cities, will hinge on how the system is designed and implemented.

Whether China can accomplish the transparency needed to instill market confidence is an open question. Transparency has been the major issue in China's own pilot programs. In a government-created market, the rules government lays down for emissions levels and which emissions are targeted are critical. But people who have advised the Chinese government say the lessons from the pilot programs will make the nationwide plan stronger.

“It merits mention that success with the emission trading system can be a one-two punch helping to lower both CO2 and PM2.5-the latter the main source of the crippling pollution in Chinese cities,” said Jennifer Turner, director of the China Environment Forum at the Woodrow Wilson Center. “The air pollution problem is a big motivator for Xi to push this and the cities to try to implement the emissions trading system — along with all the other regulations and rules coming out on air pollution.”

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