The State Council has published a guideline to promote the purchase and trading of emissions permits in regions piloting the scheme.

The pilot regions must establish mechanisms for the purchase and trading of emissions rights by 2017 to lay a foundation for the scheme to be rolled out nationwide, said a statement posted on the government’s website on Aug 25.

The pilots began in 2007 in 11 regions including Tianjin, Hebei and Inner Mongolia.

The regions can apply the permits to the pollutants that affect them the most, and revenues from authorizing emissions rights should be turned in to local governments to fight pollution.

Trading of emissions rights must be done in a voluntary, fair and environment-oriented way and trading prices will be decided by the buyer and the seller, the statement said.

Emissions rights, or permits, are key in emissions trading, a market-based approach to control pollution by providing economic incentives to reduce emissions of pollutants.

A firm gets an authorized limit on the amount of a pollutant that may be emitted. In China, the limit will be sold to firms in the form of emissions rights which represent the right to emit a specific volume of the specified pollutant.

Firms that need to discharge more must buy permits from those which need fewer permits. The transfer of the permits is referred as a trade. In effect, the buyer is paying for polluting more than permitted, while the seller is being rewarded for fewer emissions.

The pilots aim to allow the market to play a decisive role in resources allocation, encourage firms to actively cut pollutant discharges, speed up industrial restructuring and clean the environment, the statement said.