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The national carbon emission trading system is one of the important steps for China to achieve its carbon peak and carbon neutral goals
When the EU’s carbon trading mechanism announced its most significant reform since its establishment, China’s national carbon emissions trading mechanism, which has been prepared for many years, was launched on July 16. This is one of the important steps for China to reduce greenhouse gas emissions, peak carbon emissions by 2030, and achieve carbon neutrality goals by 2060.
China is the world‘s largest carbon emitter; the launch of China’s carbon trading mechanism has doubled the proportion of global carbon emissions included in trading.
Previously, the 16-year-old EU carbon market launched the most significant reform and expansion plan since its establishment; this is the EU’s mid-range goal of reducing at least a 55% net greenhouse gas emissions by 2030 and a carbon neutral goal by 2050. One of the actions.
So, what is the right to carbon emissions? What is the concept of carbon trading and carbon market?
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The world’s common goal is to control the Earth’s temperature rise below 1.5 degrees Celsius
What is the right to carbon emissions?
Carbon emission is the process of emitting greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, etc.) to the outside world during human production and business activities, and is considered to cause global warming One of the main reasons.
Carbon emission rights refer to Certified Emission Reduction (CER), which is the target of the carbon trading market.
The total amount of this quota is set by the government in accordance with the emission reduction targets promised in the international conventions, and should be gradually reduced over time. Quotas come from free government grants or auctions, and purchases from other companies or investment institutions in the carbon market.
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New energy industry will see more investment
What is a carbon trading system?
Carbon trading simply means buying and selling CER as a commodity through the carbon emission trading system, and carbon emission rights are calculated based on the equivalent of each ton of carbon dioxide.
For every ton of greenhouse gas (usually carbon dioxide) emitted by a company included in the carbon trading system, a unit of carbon emission allowance is required.
The Emissions Trading System (ETS) is a market-based energy saving and emission reduction policy tool designed to reduce carbon emissions through market functions, reduce energy consumption and atmospheric carbon concentration, and promote industry and energy structure optimization.
The carbon trading mechanism follows the “total amount control and trading principle”: the government sets and controls the total amount and CER allocation rules. Enterprises can obtain allowances in accordance with the regulations and decide to buy more allowances in the trading market or sell excess allowances according to their own emission reduction situation. quota.
After the total amount is determined, the government allocates tradable carbon emission allowances to emission control agencies (such as enterprises), which can be issued for free or auctioned.
For example, carbon emission units such as power companies and factories obtain one-year carbon emission permits from the government. If carbon emissions are reduced through technological upgrades or other measures during the year, and the allowances are redundant, they can be sold on the trading market. If carbon emissions exceed the allowable limit during the year, you can also buy the required allowance in the trading market.
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The ins and outs of carbon trading
The plan to promote carbon reduction through market means comes from the “Kyoto Protocol.”
According to the provisions of the protocol, the signatories of the agreement promise to achieve the specified carbon emission reduction targets within the specified period, and the governments of each country will allocate their total carbon emission rights to relevant companies in their own countries in accordance with their respective committed targets.
The “Kyoto Protocol” is a supplementary document to the “United Nations Framework Convention on Climate Change.” It was signed in Kyoto, Japan in December 1997, clarifying the quantitative goal of stabilizing the greenhouse gas content in the atmosphere at an appropriate level.
The world‘s first carbon trading mechanism was the EU carbon market established in 2005.
At present, there are at least 17 carbon trading mechanisms operating around the world, and the total GDP of the covered regions accounts for 40% of the world.
China Carbon Trading Market- “Largest in the world”
According to the “2020 China Carbon Price Survey” report jointly issued by the China Carbon Forum and ICF International Consulting, the price of carbon allowances in the carbon emissions trading system is estimated to continue to rise to 71 yuan/ton, and the market size will reach 284 billion yuan (approximately 44 billion yuan). US dollars).
China proposed a national carbon emission trading plan in 2011, and confirmed in the Sino-US Summit on Climate Change Joint Statement before the Paris Climate Summit in 2015 that the national carbon trading market has been piloted for a long time before the launch of the national carbon trading market on July 16, 2021.
The main body of China’s carbon trading system includes three parts: Shanghai’s National Carbon Emissions Trading Center, Wuhan’s Carbon Quota Registration System, and Beijing’s National Greenhouse Gas Resource Emission Reduction Management and Trading Center.
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Chinese President Xi Jinping announced at the United Nations General Assembly last year that China strives to reach the peak of carbon emissions by 2030 and achieve carbon neutrality by 2060
The first batch of 2225 power companies to enter the market has a total annual carbon dioxide emissions of more than 4 billion tons. International Energy Agency (IEA) data show that these companies account for one-seventh of global fossil fuel carbon emissions.
Energy-intensive and high-emission industries such as petrochemicals, chemicals, building materials, steel, non-ferrous metals, papermaking, and domestic aviation will be gradually included in the carbon trading system in the next few years.
The Ministry of Ecology and Environment of China is responsible for monitoring the trading platform, verifying the data declared by the local government, and ensuring the smooth operation of the system.
The carbon trading system is traded in several ways: listing agreement trading, block agreement trading, or one-way bidding. The transaction price of the listing agreement transaction is determined within ±10% of the closing price of the previous trading day.
The minimum declaration quantity for a single transaction of a block agreement transaction is at least 100,000 tons of carbon dioxide equivalent, and the transaction price is determined within ±30% of the closing price of the previous trading day.
Applying for one-way bidding is to purchase carbon emission allowances from potential sellers based on information released by trading institutions.
The Chinese carbon trading market launched on July 16th. The trading volume of carbon emission allowances on the first day was 4.104 million tons, and the closing price was 51.23 yuan ($7.91), which was similar to a similar mechanism in the United States. The current EU carbon market price is 59-70 US dollars per ton. U.K. 55-69 dollars.
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European carbon trading market-the world’s first carbon market
The EU carbon market was launched in 2005, and now more than 12,000 companies and other carbon emission units in 30 countries participate in transactions, covering steel, cement and other manufacturing industries, electricity, civil aviation and public utilities, and controlling emissions account for EU greenhouse gases. 45% of total emissions.
Past data show that the carbon trading market can not only promote the realization of carbon emission reduction targets, but also guide the optimization trend of the European industrial structure and energy structure.
In 2020, EU carbon emissions will be reduced by 20% compared to 2005, and carbon emissions will be reduced by an average of 1.4% per year. In the past 10 years, the EU’s coal and oil production has decreased by about 30%, while wind power, water power, solar energy and other renewable energy have developed rapidly, surpassing coal and nuclear energy in the power industry, accounting for 60%.
In order to achieve EU climate neutrality by 2050, including the mid-range goal of achieving a net reduction of at least 55% of greenhouse gas emissions by 2030, the European Commission announced a major reform and expansion of the EU carbon trading market.
Specific actions include the inclusion of the maritime industry, the abolition of free quotas for the aviation industry, the establishment of a separate carbon trading system for land transportation and building heating, a border adjustment mechanism and a special fund.