(Producer/Author: Huabao Securities, Zhang Jin, Zeng Wenwan)
1. Background: Countries have proposed dual carbon goals, and green transformation of the economy and society has become the mainstream
1.1. Climate change threatens human survival. Under the concept of sustainable development, carbon emission reduction is urgently needed
In the past 20 years, a series of phenomena such as global warming , glacier melting, sea level rise , haze weather, etc. show that climate change brought about by greenhouse effect is seriously affecting the future survival of mankind. With the invention of the steam engine and the extensive use of coal, Europe started the industrial revolution and entered the mechanical era. In 1824, the greenhouse effect was discovered, that is, greenhouse gas made the earth's surface warmer, similar to the greenhouse's effect of retaining solar radiation and heating the air in the greenhouse, which caused a "greenhouse effect". Greenhouse gases refer to some gases in the atmosphere that can absorb long-wave radiation reflected by the ground and re-emitting radiation. The six greenhouse gases currently controlled in the Kyoto Protocol are carbon dioxide , methane , nitrous oxide , hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride . Climate change does not simply affect the climate we directly feel or the monitoring sea level rise. Its impact on the entire earth is fatal and unpredictable. For example, frequent disastrous climate events, submerged coastal depressions in island countries, accelerated species extinction, imbalance in water resources distribution, affect species distribution, aggravate the vulnerability of ecosystems, and aggravate the spread of diseases, etc., which all threaten human survival and development.
In the process of industrialization, fossil energy combustion has led to a large amount of greenhouse gas emissions. The fifth IPCC report pointed out that the atmospheric concentrations of carbon dioxide, methane and nitrous oxide exceed the highest levels in the past 800,000 years. The development of industrialization has increased the concentration of carbon dioxide in the air by 40%, first due to fossil fuel emissions and secondly net emissions due to changes in land use.
1.2. Global carbon emissions continue to increase, and China has become a major carbon emission country, but per capita carbon emissions are lower than that of developed countries
Due to different development stages, developed countries have basically experienced carbon peak . China's carbon emissions are still "climbing", but per capita carbon emissions are relatively low. China's total carbon emissions in 1950 were only 21.465 million tons, and China's total carbon emissions increased by more than 100 times between 1950 and 2013, and the growth rate during the same period was much higher than that of other major economies in the world. Developed countries have always been at a low level and have been showing a downward trend. China's carbon intensity has been on a downward trend in the past 30 years and has been declining at a fast rate, and is currently on par with India and Russia. Per capita carbon emissions are also widely used important indicators for measuring the level of national carbon emissions. China is currently the most populous country and the second largest economy in the world. Although China's total carbon emissions are ranked first in the world, China's per capita carbon emissions are still far lower than those of the major developed countries in the world. At the same time, from the perspective of implicit carbon emissions, China's implicit carbon emissions generated by the "world factory" are much greater than those of developed countries.
Due to the characteristics of resource endowment and energy consumption, the large amount of fuel consumption in electric heating production and industrial concentrated coal use and transportation fields are the main reasons for China's large carbon emissions. From the perspective of resource endowment, my country has shown the characteristics of abundant coal resource reserves but low quality and uneven distribution, relatively insufficient oil and gas resources relying on imports, and rich renewable energy reserves, leading technical level. In order to accelerate economic development, my country has formed an energy production and supply system based on coal, power-centered, oil, natural gas, renewable energy, etc., which is comprehensively developed. In terms of resource use, the combustion of fuels such as coal is the main reason for the large carbon emissions. According to BP Petroleum's 2019 statistics, 93% of China's carbon emissions come from the use of fossil fuels, of which 68% come from solid fuels such as coal, 23% come from liquid fuels such as petroleum, and 9% come from gas fuels such as natural gas.In terms of industry distribution, electricity and heat production and industrial production have generated a lot of carbon emissions. According to IEA statistics, in 2018, about 89% of China's carbon emissions came from the power and thermal production (51%), industrial production (28%) and transportation (10%) departments, among which the proportion of carbon emissions in the power industry and transportation sectors gradually increased over time.
1.3. The global climate change governance system has been basically established, and the issue of climate change has gradually evolved into a political issue.
" United Nations Framework Convention on Climate Change" (UNFCCC, hereinafter referred to as the Convention) is the first in the world to fully control greenhouse gas emissions such as carbon dioxide and respond to the adverse impacts of global climate warming to human economy and society. It is also a basic framework for the international community to carry out international cooperation on the issue of global climate change. The Convention was formulated in 1992 in Rio de Janeiro, Brazil, and came into effect in March 1993. It is legally binding and aims to control the emissions of carbon dioxide, methane and other greenhouse gases in the atmosphere, stabilize the concentration of greenhouse gases at a level that protects the climate system from damage, laying the legal basis for international cooperation in responding to climate change, and is an authoritative, universal and comprehensive international framework.
The Kyoto Protocol (hereinafter referred to as the Protocol) is a supplementary clause under the framework of the Convention. It is the only top-down and legally binding greenhouse gas emission reduction treaty in the world, divided into the first commitment period and the second commitment period. The first commitment period to the Protocol was formulated in December 1997 in Kyoto, Japan, and was established at the Third Meeting of the United Nations Framework Convention on Climate Change, and came into force on 16 February 2005. For the first time, it stipulated that countries of the Parties (mainly developed countries) should reduce emissions by 5.2% based on the 1990 greenhouse gas emission levels during the commitment period from 2008 to 2012. The second commitment period of the Protocol has gone through many twists and turns, and was finally finally established at the Doha meeting of United Nations climate change negotiations at the end of 2012, and came into effect in 2013, ending in 2020.
" Paris Agreement " (hereinafter referred to as the "Agreement") is the third bottom-up international legal text in human history to deal with climate change after the 1992 United Nations Framework Convention on Climate Change and the 1997 Kyoto Protocol, forming a global climate governance pattern after 2020. The Agreement was adopted at the Paris Climate Change Conference on December 12, 2015 and signed in New York on April 22, 2016. The Agreement makes arrangements for global climate change response after 2020. The long-term goal is to keep the increase in the global average temperature within 2 degrees Celsius compared with the pre-industrial period and strive to limit the increase in temperature to 1.5 degrees Celsius. As of April 1, 2020, the Agreement had 195 parties, of which 189 had submitted instruments of ratification, with a greenhouse gas coverage of 95%.
This year's Glasgow Climate Conference closed successfully, embarking on a new journey of responding to climate change. In November 2021, the 26th Conference of the Parties (hereinafter referred to as COP26) of the United Nations Framework Convention on Climate Change successfully concluded in Glasgow, United Kingdom. COP26 was postponed to the end of one day, and negotiations on various goals have made different progress, but in general, there is a positive trend. Since the Paris Agreement reached in 2016, the main contents of negotiations at the previous Global Climate Change Conference are to encourage countries to formulate more active emission reduction targets in accordance with the Paris Agreement’s warming targets, how to implement carbon emission reduction targets, adapt to climate change, and finalize specific implementation rules of the Paris Agreement. COP26 is no exception. The host UK put forward four major goals that are expected to achieve in this negotiation, including slowing down, adaptation, funding, and cooperation.The progress of COP26 in the above four aspects is as follows: 1) There is some progress in mitigation, but there is still a gap from the 1.5 degrees Celsius target expected by COP26; 2) There is limited progress in adaptation, the global unified adaptation target has not yet been formed, and there is still a gap in funding support; 3) The funding has not met expectations, and the financial support intensity of developed countries is far from enough, and the funding arrangements after 2025 have not been clarified; 4) The cooperation results have been obvious, and the negotiations on Article 6 of the Implementation Rules of the Paris Agreement have been completed.
The national independent contribution goals set by China reflect China's active response to climate change, strive to control greenhouse gas emissions, improve its ability to adapt to climate change, and demonstrate its attitude and determination to deeply participate in global governance and assume reasonable international responsibilities. China has made a commitment that, on the one hand, for the sake of energy security, it currently has a high degree of dependence on imports of fossil energy such as crude oil and natural gas. In the long run, it is necessary to adjust my country's energy structure, achieve energy self-sufficiency, and reduce the risk of "food out" of energy; secondly, China has currently occupied the lead in the development of renewable energy and is expected to explore a development path that is lower than the traditional development path of developed countries, which can provide demonstration and reference for the subsequent development of in developing countries in , and disseminate experience and provide support through international cooperation and other means. These are of great significance to China's establishment of a good international image and enhance its international influence. Finally, under the current trend of politicizing climate change issues, China , which is in the development stage and has low per capita carbon emissions, needs to stick to the camp of developing countries, adhere to the principle of "common but differentiated", and leave room for its own development.
1.4. The carbon pricing mechanism has become the primary choice for countries to control greenhouse gas emissions
The policies of countries to control greenhouse gas emissions are generally divided into three categories: command control means, economic stimulus means, and persuasion and encouragement means. Among them, economic stimulus measures are favored by all countries due to their good flexibility and continuous improvement, and the most important of them is the carbon pricing mechanism. Since greenhouse gas emissions have negative externalities, reducing greenhouse gas emissions from the perspective of environmental economics requires internalizing the negative externalities brought by emissions, thereby achieving the result of maximizing the emission reduction benefits of the whole society. The solution to internalization of negative externalities needs to rely on government policies, follow the principle of "whoever pollutes pays for", and determine that greenhouse gas emitters should pay for the right to emit a certain amount of greenhouse gases. This process is called carbon pricing.
The carbon pricing mechanism is generally divided into carbon tax and carbon emission rights trading systems. There are essential differences in the emission reduction mechanisms of these two mechanisms: the former refers to the government specifying carbon prices, and the market determines the final emission level, so the size of the final emission is uncertain; the latter refers to the government determines the final emission level, and the market determines the carbon price, so the size of the carbon price is uncertain. It is precisely because of this difference that the two means have different characteristics. From the perspective of application scenarios, the carbon tax policy is more suitable for controlling small and micro emissions, while the carbon emission rights trading system is suitable for controlling enterprises or industries with large emissions. Therefore, these two policies can be used in combination and can play a good complementary role in the coverage range, price mechanism , etc.
As of April 2020, a total of 97 contracting parties' nationally dependent contributions mentioned the carbon pricing mechanism, and at the same time, a total of 61 carbon pricing policies have been implemented or planned to be implemented worldwide. Among them, there are 31 carbon emission trading policies, mainly including EU , China, South Korea, California and other countries or regions; there are 30 carbon tax policies, mainly located in Nordic, Japan, and Canada. In 2019, more jurisdictions expanded the coverage of the carbon pricing mechanism, including regional and industry scope. In addition, Europe's re-mentioned "carbon boundary" issue has led to the possibility of carbon tariffs for various countries in the future. Therefore, more and more countries and even enterprises are considering adopting a carbon pricing mechanism to reduce the risks brought about by this.
2. Global carbon market overview: Countries have established carbon trading market systems
2.1. The construction of a carbon trading mechanism is relatively complex, and the carbon market is mainly divided into mandatory and voluntary emission reduction. The market
carbon emission rights refer to the right to use the atmosphere or atmospheric capacity, that is, the right to emit greenhouse gases such as CO2 into the atmosphere. Carbon market refers to a market where carbon emission rights are traded as asset subjects. The quality of the carbon emission rights trading system has a direct impact on whether the carbon market can effectively reflect the value of carbon emission rights and has an important impact on the realization of the final emission reduction target. According to the Tsinghua University research, the construction of the carbon emission trading system includes fifteen links, in which the decisions or behaviors made in each link are mutually influential and interdependent. The main links include quota allocation, market regulation mechanism, offset mechanism, market supervision, carbon emission monitoring and accounting/report/verification system (MRV), etc. carbon trading market is a policy market built artificially with diverse links and complex mechanisms, involving all aspects of social and economic development such as economy, energy, environment, finance, etc., involving many issues such as government and market, governments at all levels, departments, regions, and between fairness and efficiency. It is a complex and systematic project. Therefore, it is necessary to promptly track changes in domestic and foreign policy and technological changes, conduct in-depth research on the trading system, and analyze future development trends.
According to whether the market is mandatory (performing) mandatory, the carbon market can be divided into a mandatory carbon market and a voluntary carbon market; according to the purpose of the transaction, the carbon market can be divided into primary market and secondary market. Among them, the mandatory carbon market is based on the carbon emission trading market under the principle of total control and trading (Cap & Trade), and has compulsory attributes. It originated from the Kyoto Protocol. The main participants are emission control enterprises. The trading products mainly refer to ordinary carbon quotas (used for final performance). This type of carbon market is the most common. The voluntary carbon market mainly refers to the project-based carbon credit market. Some carbon credit markets are linked to the mandatory carbon market according to certain rules. The main participants are emission reduction enterprises (mainly as sellers) and emission control enterprises (mainly as buying houses). The transaction products are mainly carbon emission reduction or carbon credit, such as Clean Development Mechanism (CDM), China Certified Voluntary Emission Reduction (CCER), Certified Emission Reduction Standard (VCS), etc.
The primary market is mainly aimed at the mandatory carbon market and the market system for initial allocation of carbon quotas. The main participants are enterprises and government agencies, and the trading products are mainly ordinary carbon quotas. The government has strong control over the price and quantity of the primary market. How to allocate and how much is allocated in the initial allocation mechanism of quota is a very political issue. It needs to be clarified from the quota allocation method (how to allocate) and the initial quota calculation method (how much is allocated). The quota allocation methods mainly include free allocation, auction allocation and the mixed use of these two methods; the initial quota calculation methods mainly include historical emission method, historical carbon intensity reduction method, and industry baseline method. The secondary market accuses emission enterprises/emission reduction enterprises/other participants of conducting spot trading of carbon quota/carbon emission reduction. Emission control enterprises obtain control over carbon quota after obtaining carbon quota in the primary market. Emission reduction enterprises obtain control over emission reduction after obtaining government/organization certified emission reduction through emission reduction applications.
From the perspective of the operation process of the carbon market mechanism, the government first determines the overall emission reduction target, first allocates the initial carbon emission rights to enterprises included in the trading system in the primary market, and enterprises can freely trade carbon emission rights in the secondary market; due to economic incentives, enterprises with relatively low emission reduction costs will take the lead in reducing emissions, and sell the excess carbon emission rights to enterprises with relatively high emission reduction costs and obtain additional benefits. At the same time, enterprises with higher emission reduction costs can reduce their compliance costs by purchasing carbon emission rights, and ultimately minimize social emission reduction costs. The price of carbon emission rights in the effective carbon market is the marginal emission reduction cost of the enterprise. In the micro-decision of enterprises, the main thing is to compare the cost of carbon emission reduction, excess carbon emission costs, and the cost of purchasing carbon quotas with the benefits brought by excessive emission production, and make corresponding decisions.
2.2. The carbon trading system is developing rapidly around the world, but it has not yet formed a unified carbon market. It originated from the pollution rights trading theory. It was proposed by American economist Dales in the 1960s and was first used by the National Environmental Protection Agency (EPA) for air pollution sources (such as sulfur dioxide emissions, etc.) and river pollution sources management. Subsequently, Germany, the United Kingdom, Australia and other countries successively implemented pollution discharge rights and traded . At the end of the last century, climate change became the focus. In 1997, more than 100 countries around the world signed the Kyoto Protocol, which stipulates the emission reduction obligations of developed countries and proposes three flexible emission reduction mechanisms. carbon emission rights trading is one of them.
Since the entry into force of the Kyoto Protocol, the carbon trading system has developed rapidly. Countries and regions have begun to establish regional carbon trading systems to achieve the goal of carbon emission reduction commitments. In the decade 2005-2015, 17 carbon trading systems across four continents have been built; and in the past year, the proportion of carbon emissions covered by carbon emission rights trading accounts for more than twice the coverage when the EU carbon trading was launched in 2005. Currently, about 38 national jurisdictions and 24 states, regions or cities are operating carbon trading markets, showing multi-level characteristics. Carbon trading has become one of the core policy tools for carbon emission reduction; these regions account for about 54% of the world's total GDP, and the population accounts for about 1/3 of the world's population; currently 24 operating carbon trading systems around the world have covered 16% of greenhouse gas emissions, and 8 carbon trading systems are about to begin operations.
As of now, a unified global carbon trading market has not been formed, but different carbon markets have begun to try to link. In Europe, the EU carbon market has become the world's largest carbon market and the leader in the carbon trading system; in North America , although the United States is the pioneer in emission rights trading, due to political factors, it has not formed a unified carbon trading system. It is currently a state of coexistence of multiple regional carbon trading systems, and the coverage is small; in Asia, South Korea is the first country in East Asia to launch a national unified carbon trading market. After the launch, it has developed rapidly and has become the world's second largest national carbon market. China has also begun to launch a national unified carbon trading market; in Oceania , Australia, as the early attempt to try the carbon trading market, has basically withdrawn from the carbon trading stage, leaving only New Zealand carbon emission rights trading system, which has returned to steady development after a long period of "release". In 2014, the California carbon trading market in the United States was successfully connected with the Quebec carbon trading market in Canada, and then in 2018 it was connected with the Ontario carbon trading market in Canada; in 2016, the Tokyo carbon trading system in Japan was successfully connected with the carbon trading system in Saitama City; in 2020, the EU carbon trading market had been connected with the Swiss carbon trading market.
Different carbon trading markets have different coverage, carbon trading rules and policies . From the perspective of the industry coverage of the carbon trading system, industry, electricity and construction are industries that are included in emission reduction in each carbon trading market. The carbon trading system of about 76.5%, 76.5% and 52.9% cover the above industries respectively. Among them, the New Zealand carbon trading system covers the widest industry, including industry, electricity, construction, transportation, aviation, waste, and forestry. From the perspective of the proportion of greenhouse gas emissions covered by the carbon trading system, the Nova Scotia carbon trading system, the Quebec carbon trading system, and the California carbon trading system covers the local greenhouse gas emissions. The proportion of greenhouse gas emissions is relatively high, but the actual emissions are relatively small; from the perspective of the size of greenhouse gas emissions covered by the Chinese carbon market, the EU carbon market, the Chinese carbon market pilot, and the South Korean carbon market are relatively large.
2.3. The prices and trading situations of each carbon market are quite different
The global trading scale bottomed out from high to low in 2016, and entered a stage of rapid growth in 2018. grew by more than three times in 2018, with growth rates of 34% and 20% in 2019 and 2020 respectively, and the market size reached 229 billion euros in 2020.The main reason for the significant increase in transaction volume is that countries' climate policies are gradually becoming more active and the scarcity of carbon emission rights is increasing.
EU carbon market is the world's largest carbon trading market, accounting for nearly 90% of the market size. In 2020, the EU ETS transaction volume reached 201.3 billion euros, accounting for 88% of the world's total, and the transaction volume exceeded 8 billion tons of carbon dioxide, accounting for 78% of the world's total transaction volume.
China is catching up. According to Ministry of Ecology and Environment , as of the end of August 2020, the cumulative trading volume of China's pilot carbon market quota was 406 million tons, with a cumulative trading volume of approximately 9.28 billion yuan, which has grown into the world's second largest carbon market with cumulative quota trading volume, but there is still a big gap from the EU. (Report source: Future Think Tank)
Carbon prices vary greatly from carbon markets, and the current carbon price is on an upward trend . The EU carbon market has the highest carbon price. On March 9, 2021, the carbon price was US$46.88/ton, the China pilot carbon trading market price was the lowest, and the Fujian carbon price was US$1.26/ton, which is 1/37 of the EU carbon price. From 2010 to 2011, the carbon price fluctuated relatively stable. In 2011, due to the European debt crisis, the carbon price fell sharply. In the following four years, due to the expiration of the first commitment period of the Kyoto Protocol, the repeated and negative attitudes of umbrella countries represented by the United States and other countries in gas policies were superimposed, and the carbon prices in each market were at a low value, basically remaining around US$10/ton. Starting from 2016, the New Zealand carbon market began to recover; the South Korean carbon market has been on an upward trend since the opening of the market in 2015; but at this time, the EU is still in a downturn, and the carbon price has remained at around US$10/ton or less.
In 2018, the global carbon market began a new round of growth, especially the EU carbon market. With the implementation of the stable reserve mechanism in 2019 and the return of the Green Party, carbon quota has accelerated its shrinkage and carbon prices have grown rapidly. In 2020, due to the impact of the epidemic, none of the carbon markets were lucky to have a plunge. In 2021, as various carbon markets gradually tightened the issuance of carbon quotas and countries have set higher voluntary contribution goals to emission reduction and all have adjusted carbon emission reduction and carbon neutrality to a higher strategic position, carbon prices have gradually risen. In addition, taking the price changes of the EU carbon market as an example, it can be found that the main factors affecting carbon prices include: supply and demand (expected), energy prices, macroeconomics, climate policies, financial markets, fulfillment time, seasons, etc.
3. International carbon market summary: The development of the EU carbon trading mechanism is the most perfect
3.1. Europe: EU emissions trading system - the world's largest carbon trading market
Europe is a leader in responding to climate change, and the EU carbon emissions trading system leads the world. At the national summit held in Brucell in December 2020, the EU agreed on a new goal of reducing greenhouse gas emissions, that is, by 2030, the emissions of greenhouse gas in the EU region will be reduced by 55% compared with 1990, a significant increase in the decline compared with the previous target of 40% reduction, and proposed to achieve " carbon neutrality " by 2050. The EU Emissions Trading System (EU-ETS), one of the EU's main policy tools to deal with climate change, originated in 2005. It is a carbon trading mechanism based on EU laws and national legislation. It has always been the world's largest, largest and most mature carbon emission trading market with the largest number of participating countries. From the perspective of market size, according to the assessment of global carbon trading volume and carbon prices by Refinitiv , the carbon trading volume of the EU carbon trading system reached about 169 billion euros, accounting for 87% of the global carbon market share. In terms of emission reduction effects, as of 2019, the EU's carbon emissions decreased by 23% compared with 1990.
The EU carbon trading market has gone through three stages of development and is currently in the fourth stage. With the development of various policies, various development policies have gradually become stricter. The fourth phase of has abolished the offset mechanism, and at the same time, the market stable reserve mechanism for reducing carbon quotas has begun. The carbon quota allocation method in the primary market has also transitioned from the free allocation in the first phase to more than 50% for auction, and it is planned to achieve paid allocation of all quotas in 2027.由于欧盟碳排放主要来源于能源使用、工业过程及航空业，故欧 盟碳市场覆盖行业主要为电力行业、能源密集型工业（包括石油化工，黑色金属生产加工，水 泥、陶瓷、砖、玻璃、纸浆、造纸和纸板生产，制氨和铝业）以及航空业。 Greenhouse gas coverage also increases from carbon dioxide to carbon dioxide, nitrous oxide, perfluorocarbons.
The characteristics of the EU carbon trading market are mainly the improvement of the carbon financial market, the stricter policy design and the gradual completeness of the policy, the establishment of corresponding supporting mechanisms, and the development of international carbon market docking. First, the improvement of the carbon finance market is reflected in the extensive participation of financial institutions in the carbon market, with diverse forms, rich types of carbon derivatives and active trading. First of all, the main forms of participation of financial institutions are to provide financial intermediary services to carbon market participants, or directly participate in carbon trading, and use the carbon market as an investment channel, mainly including brokers, traders, exchanges and clearing houses. Secondly, EU carbon derivatives mainly include forwards based on EUA (ordinary carbon quota), CER (CDM carbon quota in the offset mechanism), EUAA (Aviation industry carbon quota), ERU (JI carbon quota in the offset mechanism), futures , options , swaps, spreads, carbon index and other products. The derivatives market is developing rapidly and trading is active. According to data from the European Energy Exchange (EEX), the trading volume of carbon derivative contracts in 2018 was about 6 times the spot trading volume. Second, from six aspects, it can be observed that the EU carbon trading market policy design is becoming stricter and gradually complete:
(1) The decreasing rate of the total quota amount is accelerated, and the total carbon quota amount in the primary market decreases from 1.74% per year in the third stage to 2.20% per year in the fourth stage; (2) The offsetting mechanism is abolished in the fourth stage, further reducing the amount of carbon quota; (3) The reserve and pre-asset mechanism of carbon quota are gradually improved, from not allowing cross-period use to the stage to remain for use in the future stage, and carbon quota in the future stage is not allowed to be used in this stage in advance (but in the stage can); (4) In terms of the punishment mechanism, the excess emission part not only needs to be paid, but also needs to be paid a fine of US$114.22/ton (about 3 times the carbon price), and will be included in the credit blacklist. The EU will be included in the credit report blacklist. Member states can also formulate superimposed punishment mechanisms; (5) Implement a market stabilization reserve mechanism, shrink the amount of carbon quota circulating in the market, stabilize market expectations, and reduce the risk of a plunge in carbon prices; (6) The primary market carbon quota allocation method transitions from free allocation to auction, which is not only conducive to the government to obtain a certain amount of income and is further used for emission reduction subsidies, but also reduces the problem of rent-seeking and encourages enterprises to further reduce emissions.
Third, the EU has established corresponding supporting mechanisms to consolidate the effect of carbon emission reduction, including the establishment of a carbon fund - the establishment of an innovation fund (supports innovative technologies and industry innovation, with capital investment of at least US$450 million), a modernization fund (supports the modernization of energy systems and energy efficiency improvements in low-income member countries), the "Carbon Reduction 55" plan and the proposal of the carbon border adjustment mechanism (CBAM), as well as the supplementary domestic carbon tax policies such as Nordic and Switzerland have reduced carbon price distortion, taken into account carbon emission reduction efficiency and fairness, and reduced carbon leakage problems. Fourth, the EU began to try to connect between international carbon trading markets.尽管由于脱欧，英 国于 2021 年正式退出欧盟碳交易市场、建立独立碳交易市场，但欧盟于 2020 年实现与瑞士 碳交易市场成功链接，扩大了碳市场范围、降低了碳减排成本。
3.2. Asia: South Korea's emission rights trading system - "A rising star"
South Korea, which is highly dependent on fossil energy imports, is the first country in East Asia to open a unified national carbon trading market. In recent years, South Korea's emission rights trading system has developed well. , globally, South Korea ranks high in carbon emissions. In 2019, South Korea ranked seventh in the world in carbon emissions, and overall emissions showed a fluctuating upward trend.On December 30, 2020, South Korea submitted to the United Nations Framework Convention on Climate Change Secretariat to the United Nations Framework Convention on Climate Change the “2030 National Dependence Contribution” (NDC) target recently voted by the government at the State Conference, which is to strive to reduce greenhouse gas emissions by 24.4% compared with 2017 by 2030, and the “2050 Long-term Low Emission Development Strategy for Greenhouse Gas” (LEDS), that is, to achieve carbon neutrality by 2050, and convert the power supply system dominated by fossil fuel power generation into an energy system dominated by renewable energy and green hydrogen energy.
is strengthened compared with the emission reduction targets announced by South Korea at the Copenhagen Climate Conference (4% lower than the emission levels in 2005 and 30% lower than the estimated emissions without measures). From the perspective of emission sources, South Korea's carbon emissions mainly come from fossil fuel combustion, accounting for about 87%. Its carbon trading system covers about 74% of South Korea's carbon emissions, and also covers a wide range of industries, mainly including the power industry, industry, domestic aviation industry, construction industry, waste industry, domestic transportation industry, public sector , etc. However, from the perspective of the effect of emission reduction and reduction, South Korea's carbon emission reduction effect is not obvious. In 2019, South Korea's carbon emissions increased by 28% compared with 2005 and 1% compared with 2017.
South Korea's carbon trading market has gone through two stages of development and is currently in the third stage. The main changes in the third stage of the Korean carbon trading market are: (1) The quota allocation method has changed, the auction ratio has increased from 3% in the second stage to 10%, and the industry coverage of the benchmark method has increased; (2) Based on the market maker system implemented in the second stage, financial institutions are further allowed to participate in carbon trading in the offset mechanism market, in an attempt to further expand the liquidity of the carbon trading market, and also introduce derivative products such as futures into the carbon trading market; (3) The industry scope has been expanded to large domestic transportation companies; (4) The carbon emission limit that is allowed to be deducted by emission control enterprises through the offset mechanism is reduced from 10% to 5%.
South Korean carbon trading market has a complete carbon market legal system and a diversified market stability mechanism. However, due to the short time of establishment of the carbon market, there are problems such as relatively loose carbon market mechanism setting and low market liquidity. South Korea's carbon market legal system consists of the Basic Law on Low Carbon Green Growth (2010), the Greenhouse Gas Emission Quota Allocation and Trading Act (2012), the Greenhouse Gas Emission Quota Implementation Act (2012), the Carbon Sink Management and Improvement Act and its Implementation Ordinance (2013), and the National Allocation Plan for Carbon Emission Quota (2014), etc., ensuring the smooth operation of South Korea's carbon emission rights trading system. At the same time, in 2020, South Korea launched a "Green New Deal", planning to invest 114.1 trillion won (approximately US$94.6 billion) in government funds by 2025 to get rid of the heavy dependence on fossil fuels and promote the development of environmentally friendly industries powered by digital technology, including electric and hydrogen-powered vehicles, smart grids and telemedicine. The Korean carbon trading market has adopted a variety of market stability mechanisms to stabilize carbon prices, and the prices in the Korean carbon trading market have been fluctuating within a relatively high range.
main measures include: (1) the minimum auction price limit, the minimum auction price is equal to (average price in the first three months + average price in the last month + average price in the last month) / 3; (2) Setting up the allocation committee, in specific circumstances, the allocation committee will conduct open market operations to adjust the price, such as increasing the issuance of quotas (up to 25%), setting the highest (150%)/minimum proportion of carbon quota reserves, increasing or decreasing the proportion of future carbon quotas in advance, adjusting the maximum offset ratio, temporarily setting the upper or lower price limit, etc.; (3) allowing quota to be stored and pre-borrowed across periods, and the remaining quota reserves in this stage can be left to the future stage under certain conditions (there are restrictions on quantity); only the early use of carbon quotas in different periods in the stage is allowed, but there are restrictions on quantity. (Report source: Future Think Tank)
3.3. North America: California total control and trading plan - North America's largest regional compulsory market
California total control and trading plan has become North America's largest regional compulsory carbon trading market. North America has not yet formed a unified carbon market. Although the regional regional greenhouse gas emission reduction plan is the first mandatory and market-based greenhouse gas emission reduction plan, the California’s Cap-and-Trade Program (CCTP) has come from behind and become one of the world’s most stringent regional carbon markets. California first joined the Western Climate Initiative (WCI), and in 2012, it independently established its own total control and trading system using the framework developed by WCI (now still belongs to an important part of WCI), and began implementation in 2013. Although the United States has repeatedly expressed its attitude on climate change, California, which has a strong sense of environmental protection, is a pioneer in US environmental protection policies.
California total control and trading system is established based on the Global Warming Solutions Act (i.e., the AB32 Act) signed and passed by the Governor of California in 2006. It proposes that greenhouse gas emissions in 2020 should return to the 1990 level, and that emissions in 2050 will be reduced by 80% compared with 1990; the SB32 Act passed in 2016 proposes to ensure that greenhouse gas emissions in 2030 will be reduced by 40% in 1990, and that emissions in 2050 will be reduced by more than 80% on the basis of 1990; the AB398 and AB617 Acts passed in 2017 proposes to extend the California total control and trading system to 2030; 2018 In 2019, the governor stated with an executive order (B-55-18) that California would achieve carbon neutrality by 2045 and the emission reduction targets gradually became stricter.
In terms of total emissions, although it has been on a downward trend in the past decade, the United States ranked second only to China in 2019. As the state with the strongest comprehensive economic strength and the largest population in the United States, California's emissions are naturally not low. According to data from the California Air Resources Commission, California's total greenhouse gas emissions (excluding carbon sinks) in 2012 were 459 million tons of carbon dioxide equivalent, ranking second among states in the United States. At the same time, according to the International Energy Network data statistics, California ranks second only to Texas and ranked fourth in per capita energy consumption. From the perspective of emission sources, California's carbon emissions mainly come from transportation, accounting for about 44%, and industrial processes account for nearly 1/4, second only to transportation. Its carbon trading system covers about 75% of carbon emissions, and its coverage rate ranks third among the currently operating carbon markets.
simultaneously covers a wide range of greenhouse gas types, almost covering the types of greenhouse gases under the Kyoto Protocol. However, from the perspective of the industry coverage, it is generally included in the power industry, industry, transportation industry, and construction industry. In terms of emission reduction effects, data from the California Air Resources Commission shows that California's emissions have been on a decreasing trend since the establishment of the carbon market. At the same time, greenhouse gas emissions were slightly lower than the 1990 level in 2017, but this also means that another 40% reduction will be needed in the next decade, and the pressure of emission reduction remains.
Although California's total control system has only been in operation for more than 8 years, it has been connected with the Quebec carbon trading market and the Ontario carbon trading market under the WCI framework, and is currently in the fourth stage. Starting from 2021, the California carbon market has ushered in the following changes: 1) A price upper limit is set on the carbon price; 2) There are further restrictions on the use of certified carbon credit quotas in the offset mechanism. For example, the proportion of offsetting carbon emission reductions using non-California projects is restricted and shall not exceed 50% of the total offset. At the same time, the maximum proportion of offsetting quotas will be reduced from the original 8% to 4% within 2021-2025; 3) The rate of quota decreasing is further increased.
California's total control and trading plan successfully takes into account the two seemingly incompatible development goals of carbon emission reduction and economic development, which is due to a complete carbon trading mechanism system and supporting green industry incentive policies. California's energy-related carbon dioxide emissions decreased by 6% from 2005 to 2017, while GDP grew by 31%. The report also mentioned that since California implemented the total control and trading plan in 2013, California's GDP has grown by an average of 6.5% per year, while the U.S. national GDP has grown by 4.5% per year. At the same time, the benefits of investing in climate-friendly projects to the economy and society's health and climate emission reduction are five times the cost.The California total control and trading plan successfully proves that carbon emission reduction under the carbon pricing mechanism is not contradictory to economic growth. The main reason is the completeness of California's carbon market laws and mechanisms and the establishment of relevant supporting policies.
First of all, California's carbon emission reduction targets have always been formulated and restricted through laws and administrative orders, laying a solid foundation for the construction of the carbon trading market. Secondly, it has a flexible quota allocation and price control mechanism, which plays an important role in the stable operation of the carbon market. In terms of quota allocation, California issues free quota for industries that have been hit by trade, alleviating the pressure of enterprises to reduce emissions, and at the same time issues free quota for distribution companies (non-controlled emissions enterprises) to stabilize electricity prices, and weaken the negative impact of carbon emission reduction on economic development. In terms of price control, it includes auction minimum price restrictions, government quota reservation strategy, government open operation strategy, price containment control strategy, etc., which plays an important role in the stability of carbon prices.
Finally, California has superimposed green industry incentive policies on the basis of the total control and trading system, including renewable energy (solar energy, wind energy) and low-carbon energy systems, which not only include mandatory incentive policies (such as quantitative requirements for power generation cleaning, energy consumption efficiency, renewable energy quotas, etc.), but also economic incentive policies (such as the California solar energy plan, the government's increase in investment in hydrogen energy, etc., and part of the funds come from the total control and the income obtained through auction of carbon quotas in the trading plan).
3.4. Oceania: New Zealand carbon trading system - the "stayer" of Oceania's carbon emission reduction
New Zealand's carbon trading system has a long history and is the only mandatory carbon emission trading market remaining in Oceania after the abolition of Australia's carbon tax and the failure to operate as planned. is based on the legal framework of the Climate Change Response Act of 2002 (passed in 2001 and revised in 2008, 2011, 2012 and 2020). The New Zealand carbon trading system has been operating since 2008. It is by far the widest range of carbon market covering the industry, covering industries such as electricity, industry, domestic aviation, transportation, construction, waste, forestry, and agriculture (current agriculture only needs to report emission data and do not need to fulfill emission reduction obligations), and the threshold for inclusion in emission control is low, and the total amount of total control exhaust gas accounts for about 51% of the total greenhouse gas emissions. New Zealand's latest commitment to reduce emissions by 30% compared with 2005 by 2030 and include the 2050 carbon neutrality target in the Zero Carbon Act by the end of 2019, specifically non-agricultural sectors to achieve carbon neutrality by 2050, and agricultural sectors (biomethane) emissions by 10% by 2017 levels and 24-47% by 2050.
Although the carbon market was started earlier, the emission reduction effect in New Zealand was not obvious. In terms of total volume, New Zealand is not a major carbon emitter, but its per capita emissions are relatively large and higher than China. At the same time, greenhouse gas emissions have been on an upward trend, with emissions in 2019 increasing by 46% compared with 1990. In terms of emission sources, nearly half of New Zealand's greenhouse gas emissions come from agriculture, of which 35% come from biomethane, mainly because New Zealand is a major exporter of wool and dairy products. According to Reuters, dairy exports account for 20% of its total exports, while New Zealand's population is nearly 5 million, with cattle and sheep stocks of 10 million and 28 million respectively, which is why New Zealand's emission reduction targets will discuss methane emission reduction separately.
, which has been in the "Buddhist" New Zealand carbon trading market, began to undergo changes in 2019 to improve its mechanism design and market operations and better support New Zealand's emission reduction targets. First, in terms of total carbon quota, the New Zealand carbon trading market initially did not limit the total domestic carbon quota. The "Climate Change Response Amendment Act" passed in 2020 (for emission rights trading reform) proposed the first total carbon quota control (2021-2025).Second, in terms of quota allocation, the New Zealand carbon market used to allocate initial quotas through free allocation or fixed price selling, but introduced an auction mechanism in March 2021. At the same time, the government chose the New Zealand Exchange and the European Energy Exchange to develop and operate its primary market auction services.
In addition, the bill has set a timetable for gradually reducing the proportion of free allocations, which will reduce the proportion of free allocations to the industrial sector, specifically the gradual reduction rate of 1% per year between 2021 and 2030, and the reduction rate increased to 2% between 2031-2040 and 3% between 2041-2050. Third, in terms of agricultural emission reduction for large-scale emitters, agriculture had only reported carbon emission data and did not actually fulfill its emission reduction responsibilities, but the new regulations indicate that agricultural emissions are planned to be included in the carbon pricing mechanism by 2025. Fourth, in terms of offsetting mechanism, the New Zealand carbon trading market was connected to the carbon market under the Kyoto Protocol and the offset ratio did not set an upper limit, but the offsetting of international carbon credits was prohibited after June 2015. In the future, the New Zealand government will consider opening the offsetting mechanism to a certain extent and re-planning the rules under the offsetting mechanism.
4. Accumulate rich experience in the ten-year exploration of domestic carbon trading pilot
my country's participation in carbon emission trading can be divided into three stages: 1) The first stage (2005 to 2012), mainly participating in international CDM projects; 2) The second stage (2013 to 2020), the carbon emission trading pilot in Beijing, Shanghai, Tianjin, Chongqing, Hubei, Guangdong, Shenzhen and Fujian Provinces and cities began to operate; 3) The third stage (starting from 2021), a national carbon trading market was established and first included in the power industry. Since 2013, various pilot carbon markets have begun to operate one after another. Although China has a small number of pilot projects during the pilot stage, the carbon emissions covered are only smaller than that of the EU carbon trading system. It has spanned various pilot projects in the eastern, central and western regions of China, and has very different economic structural characteristics and resource endowments, providing multi-level reference and rich experience for the establishment of a unified national carbon market.
China's carbon trading pilot shows the characteristics of the same framework and different details in the design of the carbon emission trading mechanism.
1) Legal basis
The legal basis both lack superior laws, but the legislative forms are different. Shenzhen and Beijing are the legislative forms of local people's congresses. Shenzhen Municipal People's Congress passed the "Several Provisions on the Management of Carbon Emissions in Shenzhen Special Economic Zone" in October 2012, and Beijing Municipal People's Congress passed the "Decision of the Standing Committee of the Beijing Municipal People's Congress on Beijing's Carbon Emissions Trading Pilot Work under the Prerequisite of Strictly Controlling the Total Carbon Emissions" in December 2013, while Shanghai, Guangdong, Tianjin, Hubei and Chongqing issued management regulations through government orders, which are local government regulations and have weak legal binding force.
2) Coverage range
Gas range: except for Chongqing, all carbon pilot projects only include carbon dioxide gas. Chongqing has included six types of greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride). The proportion of greenhouse gas emissions in various places is between 40%-70%. In addition, all domestic carbon pilots have included indirect emissions into the carbon emission accounting system in the trading mechanism. This point is different from the common practices in the international carbon market. The reason is that my country's electricity distribution market price is mainly dominated by the government and is an incomplete carbon market. The power industry included in the carbon market cannot transfer costs to downstream power consumption enterprises. Therefore, counting the indirect emissions of electricity used by enterprises into their actual emissions will help reduce emissions from the consumer side.
Industry scope: Commonality, each pilot project includes industries with high emissions and large emission reduction space, such as power production, manufacturing, etc.In terms of differences, due to the different economic structures of each pilot, the scope of industries included in carbon trading is different. For example, the tertiary industry in Shenzhen, Beijing, Shanghai and other places dominate, so the transportation industry, service industry, public management departments, etc. are included in it. Secondly, the threshold for the control of each pilot is different, which is also related to its economic structure. For example, there are few industrial enterprises in Shenzhen and Beijing and the scale is limited, so the threshold for the control of the industry is lower than that of other carbon pilots. Finally, unlike other carbon pilots, Hubei does not specify the industry scope first and then set the control of the emission threshold, but directly determines which industries are included in carbon trading by setting the control of the emission threshold. That is, the latest requirement is that enterprises whose energy consumption reaches 10,000 tons of standard coal per year in any year from 2016 to 2018 will be included in the carbon market.
Number of enterprises and total quota: Although Shenzhen and Beijing are far higher than other carbon pilots in terms of number of enterprises, the total quota is indeed the least among carbon pilots. It can be seen that single enterprises in the carbon market in Shenzhen and Beijing are less emissions and quota holdings are more diversified.
3) Quota allocation method
From the perspective of free or paid, six of the eight current pilot projects of can all issue quotas through auction, but the proportion is low; secondly, only the auction of the carbon pilot carbon quota in Guangdong is aimed at the allocation of initial carbon quotas for specific industries, and the purpose of setting up auctions for other carbon pilots is to the government to regulate the market. Judging from the calculation method of initial quota allocation, except for the one-size-fits-all historical emission method in Chongqing's carbon market, other carbon pilots set different calculation methods for different industries or production processes. For example, electricity and heat generally use the benchmark method. Among them, the Guangdong Carbon Pilot is more distinctive. It splits the different industrial processes in the same industry in detail, and different processes in the same industry may use different calculation methods.
4) Punishment Mechanism
For enterprises that fail to fully pay the corresponding carbon quota during the performance period, in terms of the fine amount, there are no fines for the Tianjin Carbon Pilot pilot, and Shanghai and Guangdong Carbon Markets give relatively fixed fines for the amount of the amount. The fines for other carbon pilots are all related to the carbon price. Among them, the fines for the Beijing Carbon Market are the most severe, and the difference they have not paid is punished at 5 times the average market price. From the perspective of reimbursement measures, the carbon markets in Shenzhen, Guangdong, Tianjin, Hubei and Fujian all require enterprises that fail to fulfill their obligations to pay the carbon quota. Among them, the Shenzhen carbon market will pay the quota equal to the excess emissions within a time limit after the competent authority orders. If the illegal enterprises fail to pay the quota on time, they will be deducted equally in the quota for the next year, and the other four carbon markets will be deducted double in the quota for the next year. From the perspective of other supporting punishment mechanisms, the carbon markets of Beijing, Shanghai, Guangdong and Tianjin have also clarified that companies that have not fully fulfilled their contracts will be affected in terms of subsidy policies or incentive policies and credit records.
5) Market regulation mechanism
All carbon pilot projects will take certain intervention measures to fluctuate carbon prices. The most common measure is that when carbon prices fluctuate, the government conducts market intervention by repurchasing carbon quotas or selling carbon quotas. The Shenzhen carbon market stipulates the upper limit of the proportion of repurchasable quotas when the government intervenes in the market specifically, and the Beijing, Hubei and Fujian carbon markets clarify what kind of fluctuations in carbon prices, the government can intervene in the market. Another measure to interfere with the market is trading restrictions. The carbon markets in Beijing, Shanghai, Hubei and Chongqing have controlled the rise and fall of carbon prices, traders' positions or trading volume to stabilize the carbon market. Finally, Guangdong's carbon market also stabilizes the carbon market by setting a base price for quota auction prices.
Compared with the international carbon market, my country's pilot carbon prices are generally low. The historical highest point of my country's pilot carbon price is 122.97 yuan/ton (Shenzhen), and the lowest point is 1 yuan/ton (Chongqing); while the historical highest point of spot carbon price of EUA carbon quota of EU is 47.91 euro/ton (equivalent to RMB about 380 yuan/ton), and the lowest point is 2.68 euro/ton (equivalent to RMB about 22 yuan/ton).As of April 29, my country's carbon pilot carbon price was between 5.53-42.02 yuan/ton (of which Shenzhen's carbon market had the lowest carbon price, at 6.44 yuan/ton and Beijing's highest, at 47.6 yuan/ton), while the spot settlement price of EUA carbon quota on the same day was 47.91 euro/ton (equivalent to about 380 yuan/ton), which is 9-68 times the carbon price of my country's carbon pilot.
From the perspective of overall carbon price change trend, the average carbon price of the domestic carbon pilot in showed a downward trend from 2013 to 2017, and then rebounded by 2020. Except for Shenzhen and Fujian, the average annual carbon price of other carbon pilots also showed this characteristic. At the same time, starting from 2021, the carbon prices of each pilot project will have a convergence trend. If the carbon markets in Shenzhen and Fujian with low carbon prices are excluded, the carbon prices will basically fluctuate between 20-50 yuan/ton.
From the perspective of carbon price fluctuations, Hubei and Tianjin carbon prices are relatively stable, while Beijing, Shenzhen and Guangdong have relatively large fluctuations. When the carbon price pilot in Shenzhen and Guangdong started to operate, the carbon price fluctuated very violently. The standard deviation of carbon price in Shenzhen in 2013, 2014 and Guangdong in 2014 both exceeded 16, and decreased in the following years; the carbon price fluctuation in Beijing's carbon pilot intensified from 2018 to 2021.
In terms of carbon trading volume, Guangdong, Hubei and Shenzhen are at the forefront of carbon pilot pilot projects. As of the end of 2020, the total trading volume was 151MtCO2, 72MtCO2, and 45MtCO2 respectively; but from the perspective of carbon pilot activity (the ratio of the total trading volume to the total carbon pilot quota), Shenzhen's carbon pilot activity was the highest, reaching 14%, which means that in 2015, about 14% of the carbon quota initially allocated in Shenzhen's carbon market was circulated in the market, while other carbon market activity was 10% or below.
From the perspective of carbon trading volume, The total trading volume of the carbon pilot in 2020 decreased, but the total trading volume increased, and there was a first divergence; in 2020, except for Hubei and Tianjin, the carbon trading volume increased, other carbon pilots all declined due to the impact of the epidemic. Similar to the trading volume situation, Guangdong, Hubei and Shenzhen also rank among the top carbon trading volume, among which Guangdong's carbon trading volume is much higher than other carbon pilot projects.
5. The national unified carbon market has set sail and has become an important link in the dual carbon policy
The construction of the national unified carbon market will enter the fast lane in the second half of 2020. In 2014, the National Development and Reform Commission issued the "Interim Methods for the Management of Carbon Emissions Trading", which for the first time clarified the overall framework of the national unified carbon market from the national level. In December 2017, the National Development and Reform Commission issued the "National Carbon Emissions Trading Market Construction Plan (Power Generation Industry)", marking the start of construction of the national carbon market. On December 25, 2020, the Ministry of Ecology and Environment officially announced the "Management Measures for Carbon Emissions Trading (Trial)", which clearly stipulated the organizational structure, and issued a supporting quota allocation plan and a list of key emission units. It is only for the power industry. The first fulfillment cycle of China's unified carbon market has officially started, and China's carbon trading has moved from pilot to national unity.
On March 29, 2021, the Ministry of Ecology and Environment issued the "Guidelines for the Verification of Enterprise Greenhouse Gas Emission Reports (Trial)" and the "Notice on Strengthening the Management of Greenhouse Gas Emission Reports in Enterprises", including two annexes "Attachment 1 Covering Industry and Code" and "Attachment 2 Enterprise Greenhouse Gas Emission Accounting Methods and Reporting Guidelines Power Generation Facilities". The former regulates and guides local provincial ecological environment authorities to organize the verification of greenhouse gas emission reports from key emission units, and the latter stipulates the time nodes for the reporting, verification, and performance of greenhouse gas emission data in the first fulfillment cycle, and unifies the standard technical system for greenhouse gas emission accounting and reporting. On March 30, 2021, the Ministry of Ecology and Environment issued the "Interim Regulations on the Management of Carbon Emissions Trading (Draft, Revised Draft)" (Draft for Comments), which comprehensively and systematically stipulated the national unified carbon market framework.
6. my country's carbon trading development trend and market space
The top-level structure and mechanism of the national carbon trading market still need to be further improved. At present, the construction of my country's carbon trading market is still in its infancy. With the opening of the national carbon trading market in July 2021, relevant policies and trading mechanisms will further improve the space in the future.Specifically:
national carbon trading market has been opened, and local pilot projects have gradually withdrawn. "Interim Regulations on the Management of Carbon Emissions Trading (Draft Revision)" points out that no longer the local carbon emissions trading market is built, and the existing local carbon emissions trading market should be gradually included in the national carbon emissions trading market. Key emission units included in the national carbon emission trading market will no longer participate in the carbon emission trading market of the same greenhouse gas types and the same industries in the local area. In the short term, national and local carbon trading markets will coexist. With the establishment and gradual improvement of the national carbon trading market, the industries and related enterprises in the local carbon trading market will gradually be included in the national carbon trading market, and the local carbon trading pilot will steadily withdraw.
The national carbon trading market policy will gradually become stricter. 's current policies are relatively moderate. For example, the "Implementation Plan for the Setting and Allocation of the Total National Carbon Emission Trading Quota in 2019-2020 (Power Generation Industry)" has not strong emission control efforts for major pollution sources (the part with a large gap is free for 20% of the emissions exceeding 20%), and preferential measures are given for enterprises that use natural gas for production (the part with excess emissions of gas generator units is free, but the excess carbon quota cannot be sold), and the power plants are reduced to a certain extent in order to give enterprises a transition period. However, judging from the experience of developing foreign carbon markets, carbon trading policies will gradually become stricter.
included in the industry gradually expanded from the power industry to all high-emission industries. According to the "Carbon Emission Trading Management Measures (Trial)" issued by the Ministry of Ecology and Environment in January 2021, the first batch of carbon market transactions in the country were included in the 2,225 power generation industries. In the future, when my country's carbon market construction gradually matures, it will eventually cover eight major industries such as power generation, petrochemicals, chemicals, building materials, steel, non-ferrous metals, papermaking and domestic civil aviation.
carbon emission quota has gradually transitioned from free allocation to increasing the paid allocation ratio. "Regulations on the Management of Carbon Emission Rights Trading (Trial)" points out that carbon emission quota allocation is mainly free allocation, and paid allocation can be introduced in a timely manner according to relevant national requirements. Referring to the EU carbon trading system, the carbon quota allocation method in its primary market has transitioned from the free allocation in the first stage to more than 50% auctions, and it is planned to achieve paid auction allocations for all quotas in 2027. From the perspective of domestic regional pilot projects, six of my country's eight major pilot projects can allocate quotas through auction, but the proportion is relatively low. In the future, in terms of quota allocation methods, my country will still focus on free allocation in the early stage. Referring to the experience of mature carbon trading markets such as the EU, the proportion of paid allocation will be gradually increased in the future, make full use of the adjustment mechanism of the carbon market, and promote the effective allocation of carbon quotas.
carbon offset mechanism is expected to restart. In 2017, due to the small transaction volume of greenhouse gas voluntary emission reduction and the inadequate standardization of individual projects, the National Development and Reform Commission temporarily suspended the application of filing applications of greenhouse gas voluntary emission reduction trading methods, projects, emission reduction, approval and certification agencies and trading institutions. The Interim Regulations on the Management of Carbon Emissions Trading (Draft Amendment) pointed out that the implementing units of renewable energy, forestry carbon sinks, methane utilization and other projects can apply to the State Council’s ecological environment authorities to organize the verification of the greenhouse gas emission reduction generated by their projects; key emission units can purchase certified and registered greenhouse gas emission reduction to offset a certain proportion of their carbon emission quota. On the one hand, with the improvement of the national carbon trading market, CCER-related methodologies and projects will restart application review. On the other hand, with the development of the future carbon market, it is expected to relax the implementation of renewable energy, forestry carbon sinks, methylane utilization and other projects to implement carbon emission reduction, and expand the emission reduction market by increasing the offset ratio.
Carbon financial market is gradually improving. At present, the development of my country's carbon financial market is still at the initial level, and carbon trading is still mainly spot trading, and carbon bonds, carbon options, carbon pledge and other products are still in the regional pilot stage. Referring to mature carbon trading systems such as the EU, its trading products are mainly derivatives such as futures and options. In the future, with the establishment and development of my country's carbon market, related carbon financial derivatives will be gradually improved.
Carbon market space scale: From the 12th Five-Year Plan period to the 13th Five-Year Plan period, China's carbon trading market is in the cultivation period, and the 14th Five-Year Plan period will enter the official operation period . In the first year of the launch of the national carbon market (2021), if only spot trading is considered, the platform transaction will be entered according to the pilot area of about 5%-10%, and the trading scale of the national carbon market will reach 200 million to 400 million tons after the launch of the national carbon market. Assuming that the carbon price of the national carbon market is between 40-60 yuan/ton, the market value space of the carbon trading will reach between 8-24 billion yuan/year. According to the scale of less than half a year after the opening of the carbon market (nearly 5.4 billion) and may be included in chemical, steel and other industries next year, it is expected that the scale of the carbon market transaction will reach 10 billion yuan in 2022; if there is a breakthrough in trading types and mechanisms in the future, there is still a lot of room for improvement in the trading scale, and the futures market size will be between 80-720 billion yuan/year.
7. Investment analysis
The relevant industrial chain of the carbon trading market is mainly divided into three major sectors: carbon offset, carbon emission control and carbon services. 1) Carbon offset means the voluntary emission reduction market. The general process is for voluntary emission reduction enterprises to develop renewable energy or energy-saving and emission reduction projects, and after a series of procedures stipulated by the government, project approval, project filing, implementation and monitoring, emission reduction certification, and emission reduction filing, the final certified voluntary emission reduction can be traded in the carbon market. Voluntary emission reduction enterprises include renewable energy industry enterprises, high-tech enterprises with emission reduction technology, and enterprises with ecological assets such as forests. 2) Carbon emission control means the total carbon quota control and trading market, which mainly accuses the process of emission enterprises of timely fulfilling their contracts, trading carbon assets, and reducing carbon emissions. Emission control enterprises are high-emission enterprises included in the carbon trading market and owning carbon quota. According to the Chinese carbon market plan, they are mainly high-emission enterprises in the electricity, steel, petrochemical, chemical industry, building materials, non-ferrous metals, papermaking and domestic civil aviation industries. 3) Carbon services refer to third-party services around carbon exchanges, including related enterprises that provide governments or enterprises with services including carbon verification, carbon asset management (carbon inspection, CCER project development, carbon reporting, carbon quota use planning, emission reduction path consultation, quota trading services, etc.), green certification, carbon finance, platform or software construction, etc. The implementation of the carbon emission trading policy is a key step in achieving the dual carbon target. On the one hand, the establishment of the carbon trading market system is conducive to high-emission enterprises to reduce carbon emissions through energy-saving and emission reduction technologies, and market-oriented trading means of emission quotas provide them with arrangement power and economic support. On the other hand, renewable energy companies will also benefit from the promotion of the voluntary certification mechanism and realize corporate value revaluation through CCER transactions, focusing on the relevant investment opportunities in renewable energy enterprises, high-emission leading enterprises and carbon finance fields.
In addition, the current construction of the national carbon emission trading market is still in the early stages of construction, and there is a great demand for the construction of related systems. At present, there are still three national carbon trading systems under construction and two waiting to be built. At the same time, whether it is enterprises or financial institutions that want to participate in the carbon market, in order to better conduct carbon trading-related data reporting, transaction execution, payment settlement, quota management and other activities, the demand for direct or indirect connection with the national carbon trading system is gradually becoming stronger. In addition, with the gradual development of the carbon trading market, the demand for digital management of carbon assets and intelligent management of electricity and energy will also increase further. Therefore, digital and intelligent online service platforms or products are an inevitable trend in future development. Therefore, we can focus on leading enterprises that have accumulated experience in carbon asset management, carbon consulting, carbon trading and related system construction.
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)
selected report source: [Future Think Tank]. Future Think Tank - Official Website
