Citi helps China launch its first cap-and-trade scheme

Tianjin will test-pilot China's first energy intensity cap-and-trade scheme, with Citi acting as the buyer of the carbon emissions allowances.

Citi is participating in an energy intensity cap-and-trade scheme launched in Tianjin, which is China's first market-based mechanism to achieve energy and carbon intensity reductions.

Citi will act as a buyer of carbon emissions allowances (CEAs) under the first set of transactions of the pilot scheme.

"We have a long track record of leadership in environmental sustainability projects around the world, and as China continues to develop new mechanisms to combat climate change, Citi will be fully supportive," said Paulus Mok, country treasurer and head of markets at Citi China.

The launch of the scheme is the result of a 15-month collaborative effort between the Tianjin Climate Exchange (TCX) and Arreon New Energy. The initial pilot phase of the Tianjin scheme will target heat suppliers to more than 2 million square metres of residential buildings, with an emissions intensity cap set by the Tianjin municipal government.

Heat suppliers with an emissions intensity below the cap will be allocated CEAs, which can be sold to participating entities that exceed the cap, or to third-party traders. After the pilot phase, the Tianjin scheme may extend to cover all public, commercial and residential buildings and their heat suppliers in the Tianjin municipality. Citi will act as a purchaser of CEA's from Tianjin Jinqiang Building Energy Saving Industry Development Co.

"Citigroup has a strong working relationship with many Chinese companies at the forefront of emissions market development, and we will continue to support efforts to respond to climate change by funding and structuring innovative transactions," Mok said.

Citi China operates in accordance with the firm's own Environmental and Social Risk Management (ESRM) policy, which is founded on the Equator Principles, a global benchmark for the financial industry to manage social and environmental issues in project financing, corporate and government loans, and bond equity underwritings. Citi China is also committed to the provision of new credit facilities for clean energy and renewable power generation in China, is engaging with participants in China's financial services sector on best practices for integrating environmental risk into their credit policies, and is striving to reduce its own use of energy, water and materials with a view to lessening its environmental footprint in China.

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