China is researching the foundation of a national carbon-trading market before linking with other countries' carbon trading schemes, said a top climate change official.

The United States, Australia, Japan and the European Union are discussing the possibility of building a sub-regional or regional carbon market with China, said Xie Zhenhua, vice-chairman of the National Development and Reform Commission.

"Our priority is getting our work done first, accumulating experience and then taking part in making the rules," Xie said at a low-carbon forum over the weekend.

Australian Climate Change Minister Greg Combet has expressed hope of eventually linking Australia's carbon emissions trading schemes with China's and South Korea's, according to Reuters. Australia and the EU agreed in late August to link their carbon trade schemes by 2018.

The NDRC selected seven pilot regions in November for the trial implementation of carbon trading.

The pilot regions are encouraged to design regional regulations, specify the scope of trading and build a registration system and trading platform.

China will focus on the trial implementation of carbon trading by 2015, and then expand the scope of pilot sites and gradually build a nationwide carbon market between 2015 and 2020, said Xie.

China is working on designing the guidelines for reporting formats and accounting standards of carbon emissions, and building an online energy consumption monitoring system for major industries.

Experts have said that China, as a developing economy, faces challenges in building a carbon market due to its low market maturity, lack of public awareness and weak basic capabilities.

In the pilot phase, spot trading will dominate carbon trading, while futures trading will be considered when the conditions mature, Xie said.

The authorities should adopt measures to prevent risks and ensure a steady carbon market without dramatic fluctuations, he added.

Sun Cuihua, vice-director of the NDRC's Department of Climate Change, said the country is designing accounting methods for carbon emissions for six major industries to lay the foundations for a national carbon-trading program.

Six large emitters - the power, steel, cement, plate glass, nonferrous metal and aviation sectors - will be asked to submit carbon dioxide emissions data.

Regional carbon trading schemes in Beijing and Shanghai have become operational, and Guangdong province is set to launch its pilot carbon-trading scheme in early October.

Shanghai has determined a carbon emission target based on the city's energy consumption target set by the government.

"We are laying the foundations. Though there are many uncertainties in terms of details, setting targets is necessary," said Tang Renhu, general manager of Sino Carbon Innovation and Investment Co, which is involved in designing the technical guidelines for the power sector.

As a result of investment of more than 2 trillion yuan ($315 billion), China cumulatively saved 700 million tons of standard coal over the past seven years, which was equivalent to a reduction of 1.7 billion tons in carbon emissions, said Xie.

The annual industrial output of the energy saving, environmental protection and recycling sectors is expected to reach 4.6 trillion yuan between 2011 and 2015.

Xie said that adopting mechanisms such as the carbon market would help China reach its targets for energy saving and emission reduction in a more economical way.

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