SHANGHAI will start a carbon-trading trial before the end of June as part of efforts to reduce energy intensity and emissions.

The Shanghai Development and Reform Commission intends to issue regulations for the trading on the Shanghai Environment and Energy Exchange within this year.

Shanghai said last year that about 200 local companies, such as steel makers and hotel operators, will participate in the trial. They would receive their respective initial credits, based on historical data, for free.

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

Shanghai is one of seven provinces and municipalities chosen by the National Development and Reform Commission, China's top economic planning body, in late 2011 to set up carbon trading markets.

The city aims to cut energy use per unit of gross domestic product, or energy intensify, by 3-3.5 percent this year and reduce carbon intensity by 3.5 percent, the local commission said.