China will start a national system for trading carbon and other greenhouse gases for the next the five years starting from 2011, China Daily reported on Tuesday quoting an unnamed source.

The decision was made at a closed-door meeting attended by officials from related ministries, enterprises and expert groups, according to the newspaper. It was chaired by Xie Zhenhua, deputy director of the National Development and Reform Commission.

"The participants agreed that a domestic carbon-trading scheme is essential, but a debate is still ongoing among experts and industries regarding what approach should be adopted," the paper quoted the source as saying.

Possible sectors for pilot carbon trading projects include carbon-intensive industries such as coal-fired power generation, according to China Daily.

The meeting concluded that such measures should be strictly separated from ongoing international negotiations for a successor to the Kyoto Protocol beyond 2012 to fight global warming, the source added.

As a developing country, China does not shoulder legally binding responsibilities to reduce carbon emissions, according to the basic principle set by the United Nations Framework Convention on Climate Change. China has pledged to cut its carbon emissions per unit of economic growth by 40 to 45 percent from 2005 levels by 2020.

China has mostly relied on administrative measures to meet pollution targets, experts said. But with rising energy demand, administrative measures are too expensive for the country. Market-based carbon trading schemes will be an effective cost supplement to administrative measures.

Greenhouse gases trading is one of the basic mechanisms in the Kyoto Protocol of 2005. The most advanced trading system in Europe is EU ETS. In Russia, the first domestic trading proposal was held by Russia's largest bank, Sberbank, in early 2010. Thirty-five companies made a total of 44 bids for 77.5 million tons CO2 equivalent.