56 P. JIANG ET AL.
3.4.3 Carbon Trading and Carbon TaxesUnder the “cap-and-trade” principle, certified carbon reductions are
traded in a carbon market (Hepburn 2007 ). Carbon trading schemes
might help developers overcome the investment barriers described in
Sect. 3.5, as the costs and risks of employing technologies and knowledge
can be significantly reduced. Li et al. ( 2009 ) also note that investors can
pay off their initial extra costs within a manageable risk range by using car-
bon reduction credits granted via green building project implementation.
Partners such as developers, energy companies, and even real estate man-
agement companies could enjoy the benefits under the Chinese building
sector carbon trading mechanism.
China has made efforts to establish and promote domestic carbon trad-
ing markets. For instance, seven demonstration carbon trading centers
have been built in Chinese cities (e.g., Beijing, Tianjin, Shanghai) since
July 2008, and more carbon trading centers are slated to be built in the
future.
However, as a new trading mechanism, such markets have limitations
that must also be addressed. According to a report by Wen ( 2011 ), real
carbon trading contributions from the building sector are limited, and the
following three main obstacles prevent the current carbon trading scheme
from being developed further to more fully accommodate China’s build-
ing sector (Wen 2011 ):
- All carbon reduction projects executed in carbon trading centers are
voluntary carbon reduction activities. Without market-based incen-
tives, most developers are not motivated to initiate carbon reduction
projects. - The carbon trading mechanism is based on “cap-and-trade” prin-
ciples, and China has not set any caps on carbon emissions thus far
at any level. No carbon trading schemes can be imposed without
emission caps. - Green building carbon trading projects are difficult and costly to
implement.
As an environmental tax, a carbon tax might be implemented together
with subsidy themes, EPCs, and carbon trading mechanisms. This study
shows that decreasing carbon taxes on businesses related to green build-
ings can enhance green building developer competitiveness levels while