(Yicai Global) May 24 -- An exchange in Shanghai has begun tests to launch China's first emissions trading system in June, according to the chief of the marketplace.

"We arranged more than 30 companies across the country to conduct some real trading tests this week," Lai Xiaoming, chairman of the Shanghai Environment and Energy Exchange, said during a forum in Shanghai on May 22. " Such tests will continue for some time."

The point is to allow companies to reduce their emissions at a low cost while forming a reasonable pricing mechanism, Lai added. Carbon credits help firms, which save some resources, to trade their unused capacity for others to offset some of their emissions.

The assets may be in high demand. In September 2020, President Xi Jinping revealed China's ambitious target of reaching carbon neutrality by 2060. Before that, carbon dioxide emissions should peak by 2030. Shanghai has set an even harder deadline of peaking by 2025.

The SEEE will first carry out spot trading, but expects to add derivatives and futures contracts as soon as possible when the conditions are favorable, said Lai.

China currently has a niche carbon credit market, said the chairman. Over recent years, China has launched seven carbon trading pilots across the country while the total turnover has been about CNY10 billion (USD1.6 billion) with less than 500 million tons traded.

The domestic marketplace needs to have a certain degree of liquidity and relatively large trading volumes, said Lai. Thus, the SEEE strives to include as many firms and financial institutions as possible, he added.

First, the SEEE will introduce nearly 2,230 power companies, and gradually expand the scope to other industries that use a lot of energy, such as petrochemicals, chemicals, building materials, steel, nonferrous metals, papermaking, and civil aviation, said Lai.

The market needs to develop to involve many levels to scale up and to have an effective pricing mechanism, said Lai. This should guide companies to save costs, and control their emissions, as well as to promote technology innovation and investing, he added.

Editor: Tang Shihua, Emmi Laine, Xiao yi