An automobile insurer from Shanghai has become the first Chinese company to become carbon neutral by purchasing credits in the country's fledgling voluntary carbon trading market.

Tianping Auto Insurance paid Rmb277,699 ($40,627) on Wednesday for 8,026 tons of carbon credits accumulated by commuters during last year's Beijing Olympics. They were auctioned through the Beijing Environment Exchange.

The deal signals the growing potential for carbon trading in China, which is the world's largest emitter of greenhouse gases but so far does not have a domestic carbon market.

As in Europe and the US, trading in voluntary emission reductions is only one of many segments of the carbon market.

China has become the largest supplier to foreign investors of carbon credits from projects that have been certified to reduce carbon emissions under the clean development mechanism since 2007.

But as a developing country, China is not required to limit greenhouse gas emissions under the Kyoto protocol, so there is no domestic demand for mandatory carbon credits.

However, Beijing, as it prepares for the Copenhagen meeting in December, which is due to decide on a successor to Kyoto, is considering introducing some commitment to limiting emissions.

In June, the state council, China's cabinet, said it would introduce targets for lower carbon emission intensity to its economic and social planning. The statement was widely seen as a hint that the next five year plan, covering 2011-15, will include a carbon intensity target.

That would trigger growth in voluntary carbon trading, climate change experts said.

"Responding to climate change is a task in which the whole society needs to be encouraged to participate, and using market mechanisms is one way of doing that," said an official at the climate change department of the National Development and Reform Commission, China's climate change policymaker.