BEIJING (Reuters) - China needs to set absolute restrictions on greenhouse gas emissions if it is to fulfill its aim to set up a carbon market over the next five years, a cabinet office think tank said in a paper published on Thursday.
"It is only under an absolute emissions cap that carbon emission permits will become a scarce resource and possess the qualities of a commodity," the State Council's Development and Research Center said in a paper in Seeking Truth, a magazine published by the ruling Communist Party.
China has traditionally baulked at the idea of emissions caps either on a regional basis or for industrial sectors, invoking a key Kyoto protocol principle that puts most of the burden of cutting greenhouse gases on developed countries.
Beijing has pledged to reduce 2005 levels of carbon intensity -- the amount of CO2 produced per unit of GDP growth -- by 40-45 percent by 2020, but that is unlikely to be enough to kickstart a market, the researchers said.
"China's carbon emission intensity target is a relative amount and it must be converted to an absolute amount," they said.
They said that absolute caps could be calculated on the basis of existing intensity targets, and allocated to provinces and enterprises.
China, the world's biggest emitter of greenhouse gases, has also been under external pressure to make stronger commitments in the battle against global warming.
The country has been the biggest beneficiary of the Clean Development Mechanism, a UN-backed scheme that allows industrialized countries to meet their CO2 reduction targets by purchasing "certified emission reductions" or CERs from low-carbon projects launched in developing nations.
However, the European Union, the biggest buyer of CERs, has said it will not accept CERs generated by Chinese projects once the first phase of its Emissions Trading Scheme ends in 2012, though projects already registered will remain valid.
If China wants to continue supplying CERs when the next phase of the ETS begins in 2013, Beijing needs to negotiate a bilateral deal with Europe, and that is likely to need stronger commitments to reduce absolute levels of greenhouse gas.
In recent months, government officials have said that China is drawing up plans to impose carbon emission caps in a number of pilot provinces and sectors.
An absolute energy consumption cap of 4.1 billion tonnes is expected to be included in a new "low-carbon five-year plan" when it is published later this year.
(Reporting by David Stanway; Editing by Jonathan Hopfner)