The trading platform will be launched in the Shanghai Environment and Energy Exchange in Hongkou District and will be followed by the inauguration of a similar one in Beijing on Thursday.

About 200 companies, including steel mill Baosteel and hotel operator Jin Jiang, will participate in Shanghai's carbon trading initially.[Hong Kong Company Formation, Incorporation, Business Registration]

The two cities were among the seven provinces and municipalities chosen by China's top economic planning agency, the National Development and Reform Commission, in late 2011 to trial carbon markets. Shenzhen became the first Chinese city to start carbon trading when its online platform began in June.

In carbon trading, a cap is set on the amount of carbon dioxide that may be emitted, and the limit is given to participating firms in the form of carbon credits, or the right to discharge a specific volume. Companies have to buy credits for emissions above allocated quotas on the platform.

According to Shanghai's carbon trading rules signed by Mayor Yang Xiong earlier this month, participating firms could face [Hong Kong Company Formation|Hong Kong Company Registration]a fine of up to 100,000 yuan (US$16,400) and lose government subsidy on energy saving and emission cut the next year for noncompliance.

Xie Zhenhua, vice director of the NDRC and China's chief climate negotiator, said in Warsaw last week that the pilot carbon markets will not only allow China to cut carbon emission intensity but also help industrial restructuring.

The country intends to create a[Hong Kong Company Registration Guide] national carbon trading system after 2015 following the regional trials.