Such exchanges are a novelty in China. Ai said the establishment of the environment exchanges in Beijing and Shanghai would serve four functions. First, they would collect, select, sort and publicize information on equity transactions in environment and energy sectors. Second, they would make matches between technology and capital by creating a platform where research institutions, investment agencies, various service providers and professional certification and assessment institutions could work together on innovative mechanisms and technologies for energy conservation and emissions reduction. Third, they would increase the efficiency of resource allocation in the environment and energy market through an open information collection and distribution system. Last, they would establish open, fair, just and public platforms for standardizing technology and capital transactions for energy conservation and emissions reduction.

Xiong Yan, Board Chairman of the BEE, said the platform could introduce capital and technology into the markets for energy conservation and emissions reduction, fully mobilize market forces and deal with issues of energy conservation, emissions reduction and environmental protection through market-oriented practices.

Xiong also said the BEE would play an active role mainly in terms of facilitating technology transactions for energy conservation, emissions reduction and environmental protection; transactions for energy conservation credits; and transactions of credits for sulfur dioxide and COD emissions. It would also serve as a platform for exchanging information on reducing greenhouse gas emissions.

For local governments in China, the new energy and environment exchanges enable them to transact credits for energy conservation and emissions reduction.

"With this transaction platform, quotas for energy conservation and emissions reduction for different local governments can be exchanged, and the overall target of energy conservation and emissions reduction will be reallocated among local governments," Xiong said.

In 2007, the Chinese Government began to allocate quotas for energy conservation and emissions reduction for local governments and set up an accountability system. If any local government cannot make its quota, its leaders must be held responsible for the failure.

More efforts needed

Although the energy conservation and emissions reduction measures are geared to meet set goals, there is still a long way to go. Xie said that in the past two years only one fourth of the 2010 goal had been met.

"In the remaining three years, only if energy consumption per unit of GDP is reduced at an annual rate of over 5 percent, can we accomplish the goal in 2010. So, the task is quite arduous," said Xie.

On July 30, the NDRC published data about results of energy conservation and emissions reduction in different localities in 2007. This was the first time that China publicly issued the assessment results for local governments in this regard. Seven provinces and autonomous regions, including Hebei, Shanxi, Inner Mongolia, Hainan, Guizhou, Ningxia and Xinjiang, failed to meet their goals.

Xie said that in the second half of this year, the government would further implement its accountability system for energy conservation and improve assessment measures for the goals set by local governments, especially those that failed to meet their goals in 2007. Together with other government departments, the NDRC will also speed up the elimination of obsolete production facilities, including 13 million kw of small thermal power plants, 65 million tons of obsolete production facilities for cement and 20 million tons of outdated production facilities for iron and steel in 2008. During the first half of this year, the government closed or eliminated 6 million kw of small thermal power plants, 52 million tons of obsolete production facilities for cement and 18.42 million tons of backward production facilities for iron and steel.

According to Xie, the NDRC is expected to advance new policies to encourage energy conservation and emissions reduction, including a preferential consumption tax on small displacement vehicles, increased consumption tax rates for oil-consuming and high displacement vehicles, expanded differentiated consumption tax rates for vehicles with different displacements, and preferential policies for countervailing corporate tax and value-added tax for investment in energy-saving equipment such as high-efficiency engines and boilers.

On August 2, the State Council issued two circulars, putting forward energy-saving requirements for both industries and individuals. The circulars require industries to save oil and electricity and encourage citizens not to use disposable chopsticks, paper cups and gel pens.