China can better cut down on its carbon emissions and achieve a balance by establishing a trading model at the provincial level, according to a report released on Wednesday.

The report was compiled by the China Environmental Culture Promotion Association (CECPA) and the China Institute of Development Strategy Studies.

It proposed using carbon as a quantitative barometer in monitoring economic activities and promoting ecological compensation among the provinces.

The report said provinces that have higher carbon emissions should have to pay for the excess as "ecological compensation". Provinces with lower emissions should be entitled to compensation to further encourage their carbon neutral efforts.

It said the calculation on carbon emissions should be based on the difference between source and sink for each province, an index to measure the release and removal of carbon dioxide in the atmosphere.

The report also proposed establishing a special committee to manage a carbon fund to be contributed by the provinces. The fund could be used for promoting technological innovation in environmental protection as well as projects like the Clean Development Mechanism.

"The study's recommendations provide a strong motivation to cut down on emissions as well as a cap on emissions," Zhang Jianyu, head of Environmental Defense Fund's China office, said.

"This would be a major breakthrough since China has control policies on sulfur dioxide and chemical oxygen demand, but not on carbon dioxide.

"Furthermore, it has provided a feasible approach to promoting ecological compensation in China," Zhang said.

Pan Yue, deputy director of the Ministry of Environmental Protection, said in a press release that low carbon economy was the key to achieving China's ecological balance.

The government in its 11th Five-Year Plan (2006-2010) has set a target of reducing energy consumption per unit of GDP by 20 percent and major pollutant emissions by 10 percent from the 2005 levels by 2010.

The authorities have also started considering imposing a green tax on polluters to cut their emissions, Pan said.

(China Daily November 7, 2008)