Shanghai-based Tianping Auto Insurance became the first Chinese company yesterday to voluntarily buy carbon emission credits in an effort to help reduce greenhouse gases.

It signed a deal to pay 270,000 yuan ($39,527) for 8,026 tons of emitted carbon, which the firm produced during the last four years.

An official with National Development and Reform Commission (NDRC) yesterday acknowledged the importance of the first voluntary emission reduction (VER) trade in China.

“The deal is a very useful trial. What we should do next is to keep improving the market-based mechanism, which has become one of the most important ways and trends to reduce emission of greenhouse gases and address climate exchange around the world,” Ma Aimin of the Department of Climate Change at NDRC told the Global Times yesterday.

The campaign to encourage companies to buy carbon credits is gaining favor around the world.

Companies and individuals can voluntarily purchase credits to offset the amount of carbon they produce.

Tianping had to bid for the credits, which were approved for trading on the China Beijing Environment Exchange (CBEX) in December 2008.

Mei Dewen, general manager of CBEX, said the amount of carbon Tianping paid for was offset by legions of environmentally conscious Beijingers.

“The 8,026-ton carbon emission reduction was achieved by 81,670 people in Green Commuting Campaign during the 2008 Beijing Olympics. They used public transportation such as buses, bicycles and railways more frequently instead of driving their own cars,” said Mei.

In addition, the 270,000 yuan will be used to support other green commuting campaigns such as the 2010 Shanghai Expo Green Commuting Program.

The world carbon emission market witnessed a boom since 2005. Carbon emission trade volume in 2008 was $110 billion, and is projected to reach $3.1 trillion (up $3.09 trillion from 2005) by 2020, according to a study released in 2008 by Point Carbon.

And China has played a significant role in the market, especially in Clean Development Mechanism (CDM), an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries.

NYSE Euronext, one of the world’s most diverse exchange groups, said in June that China had an 84 percent market share in 2008 for the primary CDM market. Between 2002-2008, China accounted for 66 percent of all contracted CDM supply in the market.

Mei of CBEX saw the business opportunity in the market.

“Till July of this year, NDRC has approved 2,000 CDM projects, among which 600 projects have been registered at the UN. The 600 projects will save $100 billion of carbon emission costs for developed countries and generate $18 billion revenues for China if the price is $10 per ton.”

However, within China, there are no pending carbon deals on the horizon, besides the one with Tianping. Point Carbon attributed this to the lack of mandatory emissions trading schemes in China.

“China will be continuing to be the world market leader in CDM projects. However, there is no demand within China for emissions trading, as long as the central or provincial governments do not introduce mandatory emissions trading schemes,” Axel Michaelowa, senior founding partner at Perspectives GmbH at the Zurich Office of Point Carbon, said in an e-mail interview.

The 11th Five-Year Plan (2006-10) listed caps for energy consumption per GDP, and has set emission limits on two major greenhouse gases – sulfur dioxide and chemical oxygen demand (COD), and set a target for the ratio of renewable energy and non-renewable energy resources. But there are no exact carbon emission caps.

Ma of NDRC told the Global Times that the commission is considering inserting carbon emission intensity levels into the 12th Five-Year Plan (2011- 15).