As we know, countries are preparing this year to reach a new global climate change agreement at the Paris conference this December. Such an agreement is critical. The International Panel on Climate Change estimated a total carbon dioxide budget of about 3670 Gigatonnes of carbon dioxide for a likely chance of staying within the 2°C limit. Since the late 19th century, the world has already emitted around 1900 Gt CO2 and so has used up a large part of this budget. We are left with less than about 1000 Gt CO2 to “spend” in the future.

This implies a lot of action in the coming years. Based on a subset of scenarios and these limits, the best estimate is that global emissions in 2050 should be around 55% below 2010 levels. By 2030 global emissions should be more than 10% below 2010 levels after earlier peaking. Yet, under a range of business as usual scenarios, global greenhouse gas emissions are projected to continue rising to 68 GtCO2e in 2030 and 87 GtCO2e in 2050. There is a huge, daunting climate action gap to be filled by public and private sectors in as many countries as possible. And a market mechanism such as emissions trading could well be one of the key solutions.

Personally, I’ve known about emissions trading for a long time. In 2004 I had the opportunity to work on the first ever voluntary emissions trading scheme for greenhouse gases, in the UK, as well as the mandatory EU emissions trading scheme which began as a pilot in 2005.

Reading this report took me back to those hopeful and fascinating days – though they were also days that involved a great deal of work – for instance trying to list and calculate the allocations for over 1000 firms from all sorts of sectors, based on data that at that time was very scarce and difficult to verify, and based on projections of industry growth that was also constantly shifting. One of the experiences I will never forget is a meeting with the UK’s Iron and Steel industry, who, at that time, were arguing that their steel production would increase, despite the global shifts in manufacturing taking place, particularly China’s rise. As government officials, we had to be “steely” – otherwise, as would turn out elsewhere, we would give them too many allocations and the market would not work. Looking back on it now, I was one of 25 or so pioneering teams around the world at the time calculating and negotiating these figures. Based on these teams, the EU has had some great experience but has alsohad to face some major challenges and changes.

Which brings me to China, because China is the new pioneer. In 2011, China took the bold move as the first developing country to implement emissions trading, by first carrying out 7 ETS pilots in Gungzhou, Hubei, Shanghai, Tianjin, Shenzhen, Beijing, and Chongqing. And on December 12th 2014, the NDRC published the Interim Measures on Carbon Emissions Trading Management, which provided the basic details for the framework of a national ETS, which is expected to be launched by mid-2016.

What blows my mind as someone who worked on the EU scheme, is that with just these 7 pilots, China is already the second largest carbon market in the world with allowances equivalent to 1.12 billion tons of carbon dioxide equivalent, more than half of the EU ETS in 2013. The total number of installations – in just these 7 pilots, is almost double the number I was dealing with in the UK for the mandatory EU scheme.

Now, of course, China is the world’s second largest economy and largest greenhouse gas emitter, so perhaps I should not be surprised. And in fact it is not quite the scale of outcomes that blows my mind.

In fact two things stand out for me.

First, and what comes out through the report we have today is the wide range of experience that these pilots are giving China – well beyond the experience that the UK, EU and other existing emissions trading schemes can give. For example, what is already excellent is that China’s National scheme looks like it will be based on ambitious goals – as set out in the historic China-US agreement last year. This doesn’t mean it won’t pose challenges however in design. I found it interesting that the pilots mostly have free allowances, which I can tell you from experience are very difficult to calculate. And different pilots are covering different sectors and sizes of installations. It will be key to translate this experience – what works and what doesn’t work here in China – into the national ETS. And this report is critical for that.

Second, what really came out of the report is its focus on companies. Back in the UK I built some strong relationships with the industrial representatives and individual companies while working on the emissions trading scheme. As I said earlier many of them didn’t even monitor their electricity use, let alone convert that into emissions. This is the situation many companies here in China are in too. The report shows this. Even the most enthusiastic companies – the ones that replied to the survey – have difficulties. That said, it is surprising how fast industries, regulators and local governments can adapt and build capacity, including monitoring. Since 2011, UNDP China has been working with NDRC on development of a national ETS registry and building capacity of emissions inventory and accounting at the enterprise level. The report suggests it is essential that we and others keep doing this and increase our work in this area.

Finally, I want to say something about how this report and emissions trading links to development. I cannot emphasize enough that China’s successful implementation of a national ETS will be game-changing for the world, both in providing a market-based solution to climate change, but also in providing a model that other developing countries can follow. In this time of low oil prices in particular, it is helpful for China to be pushing its companies to manage environmental impacts well. It is a great risk management strategy. But as China moves from an industrial based economy to an innovation based economy, other developing countries will need to manage these risks as well. Countries in Africa, like Ethiopia, Kenya and Nigeria, are industrializing, including with China’s help. But they will not want to suffer the same environmental impacts that China has to date, and China can help them avoid that, including by sharing its experience and technology for emissions trading. This is an area we want to exploresupporting in future, and again, reports like todays help us think about what are the most salient features of China’s experience that can be shared.

I have already shared some of my impressions of the report, but this afternoon, you will get the opportunity to develop your impressions, through first a presentation by Mr. Richard Mao of Environomist, and then the presentation of the China National ETS by Director Zhang Xin of NCSC. Afterwards, we will have experts and players in the carbon market sharing their perspectives, and we will also open the floor for open discussion.

I wish you all an excellent afternoon, and I look forward to a robust and wide-ranging and solutions focused discussion. This is a critical stage in the history of climate change action, and it is great that we are all part of making it happen.