Carbon Trading: An Important Starting Point for the Low-Carbon TransitionWhat is Carbon Trading? How do you trade? Which entities can participate in transactions? Why build our own carbon market?

On July 16, 2021, the national carbon emissions trading market officially launched online trading, and people began to talk about one word - carbon trading.

<h1 class="pgc-h-center-line" data-track="4" >What is carbon trading? </h1>

It refers to carbon allowance trading, which is a market mechanism that trades carbon dioxide emission rights as a commodity. Among the various greenhouse gases that are required to reduce emissions, carbon dioxide is the largest, so the above transaction is based on the equivalent amount of carbon dioxide per ton as the unit of calculation, so it is collectively referred to as carbon trading, and the market for carbon trading is the carbon market.

<h1 class="pgc-h-center-line" data-track="17" > how to trade it? </h1>

illustrate. Enterprise A is an enterprise under the carbon market coverage industry, according to government regulations, the enterprise enjoys 10,000 tons of carbon emission rights per year; if A emits 11,000 tons of carbon in that year, the excess 1,000 tons of quota needs to be purchased by A; if A has carried out technological transformation in that year, only 9,000 tons have been discharged, and the remaining 1,000 tons of quota can be sold. Through this trading method, the state effectively controls the total amount of carbon emissions.

<h1 class="pgc-h-center-line" Data-track="18" Which entities can participate in transactions >? </h1>

At this stage, China's carbon market is the first batch of more than 2,000 key emitters in the power generation industry, covering about 4.5 billion tons of carbon dioxide emissions, and once launched, it will become the world's largest carbon market covering greenhouse gas emissions. Next, China will continue to expand the coverage of the national carbon market industry and enrich the trading varieties and trading methods. According to the previous plan, in addition to electricity, the industries that will be included in the national carbon market in the future include petrochemicals, chemicals, building materials, iron and steel, nonferrous metals, papermaking, aviation, etc.

<h1 class="pgc-h-center-line" data-track="19" > why build our own carbon market? </h1>

"The European experience shows that the inclusion of large carbon emitters in the carbon trading market is a flexible arrangement with obvious carbon reduction effects. The so-called carbon reduction effect refers to the government limiting the total amount of carbon emissions that enterprises entering the carbon market to reduce year by year; the so-called flexibility means that in the carbon emission trading market, emission reduction entities can choose to increase investment, improve energy efficiency or use low-carbon technology to reduce emissions according to their own conditions, and can also take measures such as purchasing carbon credits to offset emissions. In an interview with the reporter of "Economy" magazine and economic network, Zhu Tong, director of the Energy Research Office of the Institute of Industrial Economics of the Chinese Academy of Social Sciences, responded in this way.

In fact, there is not only one way to reduce low-carbon emissions, but also a carbon tax; for emission reduction entities, the two are alternative tools. "But at the macro level, the two policy instruments are not mutually exclusive. The participants in the carbon emission trading market are mainly carbon emitters, such as electricity, steel, cement, high-energy-consuming chemical companies and non-ferrous metal companies. As the energy transition progresses, it is not impossible for us to impose a carbon tax on small and medium-sized enterprises entering the carbon market. The reason why China chooses carbon trading at this stage is to value its emission reduction effect, and the other is to value its flexibility. Zhu Tong stressed.

In 2011, in accordance with the requirements of the 12th Five-Year Plan on "gradually establishing a carbon emission trading market", China launched carbon emission trading pilot work in seven provinces and cities: Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong and Shenzhen. As of the end of June 2019, the seven pilot carbon markets covered nearly 3,000 key emitting units in multiple industries such as electricity, steel, and cement, with a cumulative transaction volume of more than 330 million tons and a cumulative transaction amount of about 7.1 billion yuan, and the performance rate of enterprises remained at a high level, forming a local carbon market with perfect elements, outstanding characteristics and beginning to take shape. The total amount and intensity of carbon emissions of enterprises in the pilot scope have achieved a "double decline", showing the good effect of the carbon market in controlling carbon emissions at a lower cost.

In September 2020, at the general debate of the 75th session of the United Nations General Assembly, China announced that it would strive to peak carbon dioxide emissions by 2030 and strive to achieve carbon neutrality by 2060.

In the face of the world's urgent environmental problems, China has taken a big step. As of October 26, 2021, the cumulative trading volume of carbon emission quotas (CEAs) in the national carbon market was 19211007 tons, with a cumulative turnover of 866,997,052.15 yuan. Forecasts suggest that the overall size of China's carbon market could exceed RMB1 trillion in the future. At that time, China will certainly contribute more Chinese strength to the global energy conservation, emission reduction and green development.

Text/Economic Magazine, Economic Network reporter Kou Jiali

Editor/Ran Tan