China's Xi Jinping Announces Cap-and-Trade Carbon Program: Will it Work?

By Mark L. Clifford, Forbes.

China’s President Xi Jinping won kudos for announcing on his state visit to Washington, D.C. in late September that China will by 2017 enact a cap-and-trade system designed to cut carbon emissions.

According to the White House joint statement on the meeting between Xi and U.S. President Barack Obama, “China… plans to start in 2017 its national emission trading system, covering key industry sectors such as iron and steel, power generation, chemicals, building materials, paper-making, and nonferrous metals.”

Cap-and-trade programs typically give a company the right to emit a certain amount of a given pollutant; if it can cut its emissions beyond what’s expected, it can sell the excess allocation. Conversely, if it needs more credits, it can buy them from another company.