Reporter Du Lijuan reports from Beijing
On May 1, the "Interim Regulations on the Administration of Carbon Emission Trading" (hereinafter referred to as the "Regulations") will be officially implemented, as the first special regulation in the field of climate change in the mainland, the "Regulations" for the first time in the form of administrative regulations to clarify the carbon emission trading market system, which is a milestone in the realization of the "double carbon" goal.
Ni Qing, PwC China ESG Sustainability Market Leader, said in an interview with China Business News that the "Regulations" will gradually implement the carbon quota allocation method combining free allocation and paid allocation in the future, and gradually increase the proportion of paid allocation, which will force more enterprises to give up the purchase of high carbon allowances and consider the transition to low-carbon production methods, so as to guide the whole society to achieve green and low-carbon development.
According to data from the Ministry of Ecology and Environment, with the increase in the enthusiasm of enterprises to participate in carbon trading, by the end of last year, the cumulative turnover of the national carbon emission trading market reached 440 million tons, with a turnover of about 24.9 billion yuan, and showed a gradual upward trend.
Introduce paid distributions in due course
The mainland's carbon market is mainly composed of two parts, one is the national carbon emission trading market, that is, the mandatory carbon market, and the other is the national greenhouse gas voluntary emission reduction trading market, that is, the voluntary carbon market. Together, the mandatory and voluntary carbon markets constitute the national carbon market system.
Since 2011, China has established eight local carbon markets in Beijing, Tianjin, Shanghai, Chongqing, Guangdong, Hubei, Shenzhen and Fujian. In July 2021, the national carbon market was officially launched, and more than 2,000 power generation companies were included in the first batch, covering about 40% of the country's total emissions.
"From the perspective of development trends, the amount of allowances allocated for free in the national carbon market is tightening, and in the case of market demand exceeding supply, it will be a trend to introduce paid allocation of carbon allowances in a timely manner. A person related to the power industry said.
At present, China's carbon emission trading market quota allocation method is free of charge, but most mature carbon markets in the world have carried out a combination of free and paid allocation. In this context, the "Regulations" propose that the quota allocation will gradually implement a combination of free allocation and paid distribution in accordance with the relevant requirements of the state.
The research report of Minsheng Securities pointed out that the rise in carbon prices in the mainland will be an inevitable trend, and the average price of carbon allowances in 2022 will be 55.3 yuan/ton, which is still a large gap compared with the international level. The reduction in the proportion of free carbon allowances will also push up the price of carbon. According to conservative estimates, the size of the carbon allowance/CCER spot market is expected to reach 4400 billion yuan and 20 billion yuan respectively in 2025.
In view of this, the officially implemented "Regulations" have made clear provisions on the coverage, inclusion objects, allowance allocation, data supervision, quota settlement and trading operation of the carbon emission trading market, which will further build a carbon emission trading system with clear rights and responsibilities.
Ni Qing believes that the "Regulations" provide institutional guarantees for the standardized development of the carbon market, which will boost the confidence of participants in the development of the carbon market, and is also expected to promote the rise of carbon allowance prices across the country.
Statistics from the Ministry of Ecology and Environment show that since the launch of the carbon market, carbon prices have risen steadily. At present, it has risen from 48 yuan per ton at the beginning to about 80 yuan per ton, an increase of about 66%.
Zhao Yingmin, vice minister of the Ministry of Ecology and Environment, said that in the future, paid distribution will be introduced in a timely manner and the proportion of paid distribution will be gradually increased, which will help control the total amount of carbon emissions, make the carbon price more truly reflect the cost of carbon emission reduction, and better play the role of the market, so as to enhance the voice of the mainland carbon market in international carbon pricing.
According to PwC's research, carbon emission trading aims to use market mechanisms to promote low-carbon development, and the implementation of the Regulations not only reflects the country's determination to promote the dual carbon goals, but also an important measure to continuously improve the mainland carbon market.
Expand industry reach
In accordance with the decisions and arrangements of the CPC Central Committee and the State Council, the national carbon emission trading market has chosen the power generation industry as a breakthrough, and since the official opening of the market in July 2021, it has successfully completed two compliance cycles. The first compliance cycle is from 2019 to 2020 and the second from 2021 to 2022.
At present, the national carbon emission trading market covers about 5.1 billion tons of annual carbon dioxide emissions, and 2,257 key emitting enterprises are included, making it the world's largest carbon market covering greenhouse gas emissions.
It is reported that China's carbon emissions are mainly concentrated in eight key industries: power generation, steel, building materials, nonferrous metals, petrochemicals, chemicals, papermaking, and aviation, and these eight industries account for 75% of the country's carbon dioxide emissions. "At present, we have only selected the power generation industry as a pilot, that is, the remaining seven industries have not yet been included in the mandatory market, and in order to play the role of the national carbon emission trading market in the future, the remaining industries need to be included as soon as possible. The above-mentioned people in the power industry pointed out.
The reporter learned from the Ministry of Ecology and Environment that there is no specific timetable for when the remaining seven high-emission industries will be included in the national carbon emission trading market.
In this regard, a source from a carbon asset management company revealed that although the other seven industries have not yet been included in the national carbon market timetable, the verification of carbon emission accounting reports of these industries has been carried out on a regular basis. "From what we know, the preliminary plan for the inclusion of steel, non-ferrous metals and other industries in the national carbon market has been completed, and it is expected to become the first industry to expand the national carbon market. The person said.
In March this year, the Ministry of Ecology and Environment (MEE) issued a notice on studying, publicizing and implementing the Interim Regulations on the Administration of Carbon Emission Trading. The notice proposes that the existing local carbon emission trading market should refer to the provisions of the "Regulations" to improve the relevant management system, strengthen supervision and management, expand the coverage of the industry, implement total control, paid distribution, market stability reserve mechanism and other aspects of the first trial, continue to play a good role in the pilot, avoid breeding financial risks, and ensure the smooth and orderly operation of the market.
All parties in the market also showed a more positive attitude towards the notice.
The above-mentioned carbon asset management company said that as a market participant, the launch of the mandatory carbon market has both risks and opportunities for enterprises. "In the current context, whether the industry will be included in the mandatory carbon market or not, compliance is the first principle, and we are also transitioning to low-carbon technologies to reduce carbon emissions to obtain more carbon emission allowances. The person said.
The market expects that 2030 may be an important time node for the remaining industries to be included in the national carbon emission trading market, which is in line with the central government's initial plan for carbon peaking.
(Editor: Hao Cheng Review: Zhang Rongwang Proofreader: Yan Jingning)