Tesla electric car on display, by Raymond Tec, CC BY-SA 4.0
"Regardless of carbon credits (or selling bitcoin), Tesla is finally profitable."
A report in the tech media outlet The Verge last July used the headline to describe the financial health of Tesla, a new energy vehicle maker. Tesla reached a milestone — after excluding revenue from selling carbon credits to other car dealers, Tesla finally made a profit by selling cars and energy products.
"This is the eighth consecutive quarter of Tesla's profitability, but the first time it has been profitable as a 'car manufacturer.'"
The reason why this profit is so concerned is that Tesla's profits in previous quarters have come from revenue outside of automobile manufacturing — mainly from the sale of carbon credits. In 2020, Tesla earned $1.58 billion in revenue from the sale of carbon credits, compared to a net profit of just $720 million during the same period.
The so-called carbon emission credit is another term for carbon emission rights. At least 14 U.S. states have established regulatory rules to encourage automakers to produce more low-carbon vehicles, including electric vehicles. According to the requirements, car companies must produce a certain proportion of "zero-emission vehicles" according to the total number of cars sold in a state, and obtain "carbon credits" according to the types and quantities of zero-emission vehicles produced; if they do not meet the requirements, they must purchase carbon credits from enterprises with quotas.
Tesla only produces electric vehicles, and has a wealth of carbon credits in its hands, which can be profited by selling carbon credits to other companies.
Behind the "Tesla selling carbon credits to make a profit", why should the government encourage car companies to produce "zero-emission vehicles"? The background is that the current climate warming is getting worse, the natural environment is facing serious damage, and if there is no action, human survival will face challenges.
To avoid a tragic moment, politicians, entrepreneurs, and every individual in their lives should take action to actively achieve "carbon neutrality." Yao Yang, dean of the National Institute for Development Studies at Peking University, said, "Emissions reduction involves everyone on the planet, and understanding carbon emissions and carbon neutrality is the first step for everyone to participate in reducing emissions.
What is carbon neutrality?
Uncontrolled carbon emissions will lead to rapid changes in the global climate, challenging the natural environment and threatening human survival. Statistics show that temperatures have risen far more than scientists expected, with the latest data being that the global average temperature in 2020 will rise by about 1.2 degrees Celsius compared to pre-industrial levels.
Map of global temperature anomalies from 1880 to 2020
Abnormally rising temperatures can cause the ice layers of the north and south to melt, and sea levels will rise, inundating cities in lower locations. According to a report published in the National Academy of Sciences, antarctica will melt 252 billion tons of ice per year from 2019, about 6 times more than 40 years ago.
Assuming that global warming is controlled within 2 degrees Celsius before industrialization, sea levels may rise by 0.3-0.6 meters by 2100; if left unchecked, a rise of 1.1 meters is normal. It should be noted that about 10% of the world's population lives in areas below 10 meters above sea level, especially in coastal areas where many economically developed cities are located.
Map of Sea Level Changes along the Coast of China, 1980-2017, quoted in China Sea Level Bulletin 2017
More seriously, rising temperatures will upset the planet's ecological balance, with dire consequences, including extinctions.
But the trajectory of human society shows that the social economy cannot leave the fossil energy that has been used for many years on a large scale for the time being. So governments seek to strike a balance between economic development and controlling carbon emissions.
To coordinate national measures and address challenges together, a total of 178 Parties reached the Paris Agreement in 2016. The long-term goal of this agreement is to limit the increase in global average temperature to 2 degrees Celsius compared to pre-industrial levels and to work towards "within 1.5 degrees".
Carbon neutrality is an important way for governments to achieve the goals of the Paris Agreement. The so-called "carbon neutrality" refers to the direct and indirect emission of greenhouse gases by human activities in a certain area for a certain period of time, and the greenhouse gases absorbed through afforestation and other greenhouse gases cancel each other out, so as to achieve its "net zero emissions".
The Paris Agreement passes on the spot, by Unclimatechange, CC BY 2.0
By early 2021, more than 120 countries and territories had proposed targets related to "carbon neutrality" or "net zero emissions," including roadmaps and legal procedures. For example, countries such as the United Kingdom, France, and Sweden have completed legislation; countries such as Spain and Chile are in the legislative process; and countries such as the United States and Japan have issued policy announcements.
However, "carbon neutrality" is not an easy word, and achieving carbon neutrality means putting in great effort and facing the potentially concomitant loss of benefits. This naturally means that at multiple levels such as how to set goals and how to achieve goals, the interest game between countries follows the shadow.
Based on different interests and demands, support or opposition to certain specific policies and viewpoints, countries form alliances to speak out together and advance and retreat together.
The "umbrella group" represented by developed countries such as the United States and Australia believes that the responsibility for emission reduction should be determined according to current emissions, not based on historical emissions, and developing countries should also bear the responsibility for emission reduction.
In contrast, the Basic Four, including a number of emerging economies such as Brazil, India and China, have similar interests to other developing countries, requiring developing countries to implement voluntary emission reductions and emphasizing the unshirkable responsibility of developed countries on climate change.
How to be carbon neutral?
China's work in the field of carbon neutrality is advancing in an orderly manner.
According to the central deployment, China will strive to achieve a peak of carbon emissions by 2030 and carbon neutrality by 2060. "People's Daily" recently commented that the recent Central Economic Work Conference stressed that "we must correctly understand and grasp the carbon peak and carbon neutrality", and made major arrangements for steadily promoting related work, pointing out the direction of efforts and the focus of work.
The commentary highly affirmed the significance of carbon peak carbon neutrality work, "is an inherent requirement to promote high-quality development", but also paid attention to the difficulty of the work. For China, this huge plan involving a series of comprehensive changes in economic structure, social cognition, energy innovation, etc., is not easy to implement. As "a broad and profound economic and social change, it is by no means easy to achieve," the commentary said. ”
The researchers outline the difficulties and challenges facing China in achieving carbon neutrality.
An EY special report on carbon emissions pointed out that first, China is facing a game of economic development and energy conservation and emission reduction goals, "energy consumption growth and energy conservation and emission reduction pressure coexist", China "is still in the rapid promotion period of industrialization and urbanization ... Energy demand needs to continue to grow reasonably. ”
Second, China's energy transition technology is facing challenges. Under the new energy system, many industries will face the need for process technology transformation to varying degrees. On the one hand, the scale, difficulty and high cost of technological transformation are large, and on the other hand, it also faces the uncertainty of renewable energy "watching the sky and eating".
Middelgrenden Sea Windmill Park, Denmark, by Andreas Klinke Johannsen, CC BY-SA 2.0
In the case of wind power, for example, wind power relies on the movement of the wind, but there are fluctuations in wind speed, resulting in uncertainty in wind power production, and there are few solutions to this in existing technologies.
Third, the public's understanding of carbon neutrality needs to be strengthened. According to the report, "carbon neutrality means that all walks of life need to continue to invest in the research and development of low-carbon emission reduction technologies, energy efficiency improvement and electric energy substitution", but due to the lack of economic benefits in the short term, all links of the industrial chain and end consumers will bear additional "green costs".
How can we achieve carbon neutrality? Researchers say they need to work together on technology feasibility, cost controllability, policy guidance and multilateral win-win results.
The report points out that the actual situation of China's economic development and carbon emissions requires that we must find low-carbon technologies that can be replicated and promoted. For example, carbon capture, utilization and storage technology (CCUS technology) is used to improve energy efficiency; renewable energy technology is used to accelerate the phase-out of traditional fossil energy.
However, it should be noted that most technologies are still in the preliminary research stage, and whether they can be promoted on a large scale is still unknown.
Once the technology is viable, one also has to consider whether the costs are manageable: companies will not risk bankruptcy to adopt low-carbon technologies; even if they are willing to consider low-carbon technologies, they must also consider the attitudes of all parts of the supply chain, including end consumers, whether they are willing to pay more for low-carbon technologies.
The wording of the report is quite sharp: "Any individual and enterprise in the market is rational, and 'price' is the most scientific vane for measuring all new things." ”
When market self-action fails to meet the state's roadmap, the researchers recommend that government departments "develop policies to plan and monitor the behavior of the whole society," including improving industry emission standards, establishing carbon tax collection mechanisms, and improving carbon emissions trading markets. The goal is to "guide, mobilize and constrain" the behavior of market entities.
In fact, under the premise that the target direction is roughly similar, different countries have taken different routes, and the results achieved so far are not the same.
Previously, the UAE tried to create a "zero carbon" model "Masdar" - the world's first city to use green technology to achieve self-circulation in the city and achieve zero carbon and zero waste standards. In the scenario, Masdar will use all renewable energy sources and abandon gasoline, while achieving zero emissions of sewage and carbon dioxide.
But the plan, announced in early 2008, did not go well, with Masdar only 5 percent of construction completed by 2016, when it was theoretically due, with completion delayed to 2030. Media outlets have reported it as a "ghost town" where only 300 students live, a far cry from the planned 50,000 permanent residents.
A corner of Masdar City, by Raphael Iruzun Martins, CC BY-SA 2.0
Qiu Baoxing, the former vice minister of housing and urban-rural development, disagreed with this line, criticizing Masdar as "a city designed for the integrated use of new technologies, not for people's lives, ignoring the gradualness of urban transformation and the creativity of residents' autonomy, being a 'low-carbon living machine', but having nothing to do with human behavior." ”
Masdar's case shows that going it alone based on good intentions cannot solve the common problems facing the world, and countries need to work together in terms of goal setting, road map implementation, and so on. The Paris Agreement has taken a crucial step, but it is not enough.
What does carbon neutral mean?
People often think of carbon neutrality as having little to do with them — "that's an environmental issue" and "that's a politician's business." "But in fact, carbon neutrality is relevant to everyone, and those looming connections will become clearer in the future."
Whether it is daily life, transportation, or industry development, all aspects of society will be affected by carbon neutrality.
For example, in order to reduce the consumption of fossil fuels, it may be increasingly difficult for people to buy gasoline or diesel-fueled motor vehicles. Since 2016, there have been governments or officials at the national or city level who have proposed in the form of bills or documents to "prohibit the sale of gasoline and diesel vehicles."
In a 2019 report released by the Energy and Transportation Innovation Center, think tank suggested a timeline for the phase-out of gasoline and diesel vehicles: It is too early for China to completely phase out fuel vehicles by 2030, but 2040 is possible.
Evening transportation in Beijing's CENTRAL BUSINESS DISTRICT, by sunming.biz, CC BY 2.0
In fact, in the traffic-congested metropolises of Beijing and Shanghai, new energy vehicles are more likely to obtain licenses than traditional fuel vehicles. In Beijing, the quota of new energy vehicle license plates is more than that of fuel vehicles, and in 2022 Beijing plans to issue 100,000 passenger car license plates, of which the quota for new energy vehicles is 70,000. In Shanghai, people can apply for new energy vehicle licenses at a low cost, but fuel license plates need to be auctioned to obtain them, and the price is usually much higher.
For companies, carbon neutrality is even more impactful. Neither the company itself nor the various links in its supply chain can escape the impact of carbon neutrality.
For example, the national unified carbon emissions trading market was launched in 2021, officially rolling out greenhouse gas emissions trading nationwide to more efficiently control the country's total carbon emissions.
Yang Fan, chief policy analyst at CITIC Securities, said that before the carbon peak in 2030, China's carbon price will remain roughly low to ensure manufacturing profits, but will rise rapidly after that. Xu Lin, chairman of the Sino-US Green Fund, said that the increase in carbon trading prices will increase the cost of enterprises and force enterprises to innovate.
Overseas, some large companies have also made commitments to carbon neutrality goals – they are on the front lines of business operations and technological innovation, with more nuanced practices.
Amazon proposes to achieve full renewable energy by 2025 and carbon neutrality in the whole supply chain by 2040; Google proposes to achieve global real-time zero-carbon operation by 2030, shortening the zero carbon statistical range from "year" to "hour"; Microsoft also proposes to achieve "negative carbon emissions" by 2030 and eliminate all historical carbon emissions of enterprises by 2050.
(Text/Wang Liu)
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