Forming a three-party low-carbon club in East Asia

Successfully linking the carbon trading markets of China, Japan and the Republic of Korea would provide a big boost to international efforts to reduce greenhouse gas emissions

China, Japan and the Republic of Korea are major trading partners of one another, and their interdependence is playing an important role in East Asian economic integration. But the three countries should also work more actively together to tackle climate change and promote common sustainable development. They should strive to establish a low-carbon community with a shared future in East Asia.

In 2017, the GDP of the three countries combined was 23 percent of the world GDP, with China the second-largest economy in the world, Japan the third and the ROK the 12th. Their total trade volume accounted for 20 percent of the world trade volume, with all three countries importing more than 20 percent from the other two.

Carbon emissions are the leading cause of climate change, and China, Japan and the ROK rank first, fifth and seventh, respectively, for their carbon emissions, with their total emissions exceeding one-third of the global total. Therefore, to tackle climate change, the three countries should reduce their carbon emissions with shared interests, responsibilities and risks, leverage their respective financial and technological strengths and join hands to combat climate change.

China, Japan and the ROK consumed a total of 3.89 billion tons of oil (in oil equivalent) in 2017, and emitted 11.3 billion tons of carbon dioxide in 2018, according to BP statistics. Based on calculations, if China, Japan and the ROK were to cooperate in energy technology, energy mix and industrial structure, and China and the ROK managed to keep their energy consumption per unit of GDP and CO2 emissions at the same levels as Japan, they could lower both indexes by over 60 percent, and reduce emissions of other harmful substances such as sulfur oxides and nitrogen oxides.

By doing so, not only would greenhouse gas emissions be reduced on a large scale at lower costs, but the energy mix, energy security, industrial structures, energy efficiency and quality of people's lives in these countries would also be improved, with environment-friendly renewable energy being adopted, acid rain being eased and large-scale afforestation being promoted, hence contributing to other sustainable goals in addition to curbing human induced global warming.

To build a low-carbon community, the three countries need to further promote their trilateral cooperation, improve global governance by working on building a third-country market cooperation system, emission trading market, the environmental protection industry, China-Japan-South Korea nuclear security system, and so on. They should also strive to establish a trilateral carbon emissions trading system.

Carbon pricing systems, such as carbon trading and carbon taxes, are important policy tools to promote emissions reduction. The European Union has already established an EU emissions trading system to further cut emissions reduction costs by minimizing margin costs (minimizing emission reduction costs). Creating links between the three country's emissions trading systems would boost the East Asia carbon emissions trade and so facilitate large-scale carbon emissions reduction. Japan, China and the ROK have fixed their own intended nationally determined contributions in accordance with the Paris Agreement. But to reach the goal of achieving net zero emissions in the second half of this century, the efforts of individual countries alone are not enough. Instead, wide-range cross-border decarbonization cooperation needs to be considered.

Japan is home to the most cutting-edge low-carbon technologies and patents. Therefore, it is possible to build a common carbon emission trading system in East Asia by integrating trading systems under different social systems and at different development phases, so as to realize prosperous economy and large-scale carbon dioxide emissions reductions.

Since 2013, China has launched pilot carbon emissions trading projects in seven cities and provinces, including Shenzhen, Shanghai, Beijing, Guangdong province, Tianjin, Hubei province and Chongqing. In December 2017, China announced the establishment of a national carbon market, which is the world's largest emissions trading market. It is estimated that the size of China's carbon trading market has reached 5 billion tons of CO2 each year. The EU and the ROK are already seeking to establish connections with this huge market.

If connections among the three countries' emissions trading systems can be established, it would provide more cost-effective emissions reduction options, especially for international companies which are able to trade their emission quota in different countries but under the same trading system. It's of vital importance to establish a wide-area carbon trading market through links between different systems.