Approaching zero carbon ｜ Liang Zhaohui： China should lay a good job in carbon market, CCER and green power combination boxing.
[Editor’s note]
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Poster design Yu Fei
With the rapid development of China’s economy and the change of industrial structure, energy is also facing transformation, and the carbon market is born, with the main goal of realizing "double carbon". However, the concept of "carbon market" is still very new to many enterprises. It refers to the trading of carbon emission rights. Simply put, it is to buy and sell carbon dioxide emission rights as a commodity. The construction of carbon market in China started from local pilot in 2011, taking the power generation industry as a breakthrough, and it is a policy tool to control greenhouse gas emissions.
According to Liang Zhaohui, an associate researcher at the Institute of Applied Economics, Shanghai Academy of Social Sciences, China’s carbon market is essentially a product of policies, rather than a commodity traded in general. As a binding policy, it can force enterprises to reduce their carbon emissions, and trade with CCER (voluntary emission reduction certified by the State) and green electricity (refers to power users docking photovoltaic, wind power and other power generation enterprises through power trading platforms to buy electricity with zero or nearly zero carbon dioxide emissions in the production process. ) and other policy means, together constitute a set of combination boxing. Therefore, she believes that an active carbon market should be a result, not a goal. To develop the carbon market in China, it is more important to look at the role of this market in the transformation of energy structure, and realize carbon emission reduction in an orderly manner on the premise of ensuring economic development and energy security.
The Paper: The carbon market came into being with the energy transformation. How does economic development affect the energy transformation?
Liang Zhaohui:China’s rapid economic development has two major driving forces, one is urbanization, and the other is industrialization, both of which need huge energy supply support. In the era dominated by consumer goods industry, the living standard is low and the energy consumption is not large. After China’s entry into WTO, the process of industrialization and urbanization has been accelerated, and it is necessary to develop infrastructure vigorously, so it must rely on the raw material industry. However, the raw material industry has high energy intensity and high carbon emission intensity, which has brought about environmental constraints. Therefore, the state has put forward energy conservation and emission reduction and related binding indicators. Nowadays, the development of infrastructure has entered the stage of "new infrastructure", and the growth rate of industrial energy consumption has slowed down. At the same time, with the improvement of people’s quality of life, the energy consumption of life and service industry has increased and is rigid.
Taking Shanghai as an example, the proportion of raw material industry rose rapidly from 2000 to 2010, and energy consumption nearly doubled in ten years; After 2010, Shanghai vigorously adjusted its industrial structure, developed nine strategic emerging industries, and increased the industrial proportion of equipment manufacturing industry. In the last decade, energy consumption only increased by about 10% and entered a platform period. In the future, the energy industry should not only meet the demand of economic development for energy, but also reduce the carbon emissions of energy by gradually increasing the proportion of renewable energy.
The Paper: What is the goal of developing carbon market in China?
Liang Zhaohui:Since 2011, the construction of carbon market in China has come into being with the energy transformation. It is a binding policy aimed at achieving "double carbon" and forms a policy system with other incentive policies. After more than ten years’ efforts, on the basis of accounting and statistics of energy consumption and carbon emissions of enterprises, the state has issued quotas for high-carbon emission industries such as electricity. If we refer to foreign carbon markets such as the European Union, we may further expand the scope of industries in the future.
In essence, the carbon market is a policy product, which mainly serves to achieve the goal of "double carbon", rather than buying and selling commodities in general. As a binding policy, carbon market can force power companies to reduce carbon emissions, while incentive policies can encourage the development of related industries in production and application, such as the rapid development of photovoltaic and wind power industries in recent years, industrial policies have promoted technological progress and cost reduction, and accelerated the large-scale landing of new energy in China. In a word, binding policies and incentive policies together constitute a set of policy systems, which promote enterprises to achieve energy conservation and emission reduction and double control of energy consumption, and also promote the development of new energy industry.
The Paper: How do China enterprises participate in carbon market transactions?
Liang Zhaohui:At present, China’s carbon market transactions are mainly aimed at the power industry. Before the transaction, the government allocated the carbon emission quota, that is, carbon emission rights, to key emission units. If enterprise A increases R&D investment and carries out technological innovation, and the actual carbon emission is lower than the quota, it can sell the remaining carbon emission rights in the market; If enterprise B’s carbon emissions exceed the quota, it needs to buy carbon emission rights from other enterprises at market prices to offset the excess carbon emissions.
In addition, the National Certified Voluntary Emission Reduction (CCER) is a supplementary mechanism of the carbon market, which is expected to be restarted this year after being suspended in 2017. CCER refers to quantifying, verifying and selling the carbon dioxide absorbed by greenhouse gas emission reduction projects (renewable energy, forestry carbon sink, methane utilization, etc.), which is equivalent to the contribution of enterprises to emission reduction can be standardized and certified. For example, the cost of wind power, photovoltaic and other related equipment and operations is sold through CCER transactions, thus encouraging enterprises to continue to increase investment in renewable energy.
The Paper: Apart from power companies, which industries should also pay attention to the carbon market?
Liang Zhaohui:First of all, for power companies, the emission quota gives them the pressure to transform from thermal power to renewable energy, and at the same time, it can be bought or sold through the market, which makes this pressure price elastic, which is different from administrative instructions. Secondly, raw material industries, such as petrochemical, steel, building materials and other high-emission industries, may also be included in the carbon market in the future, so we need to pay more attention to them. In addition, we should also pay attention to the carbon market for energy equipment industries and industries with high energy consumption, such as transportation enterprises.
Global capacity and output of photovoltaic products in 2022 and global share of China products.
Source: China Photovoltaic Industry Association (CPIA), Annual Report of Photovoltaic Industry in China from 2022 to 2023, August 2023.
The Paper: Why is there a lack of activity in China’s carbon market? Do we need to benchmark foreign countries to develop carbon market?
Liang Zhaohui:I believe that the active carbon market should be a result, not a goal. China’s carbon market does not realize economic benefits through trading, but forces enterprises to reduce carbon emissions and achieve the goal of "double carbon". If the carbon emission quota is rapidly reduced, it will push up the cost of enterprises, and eventually it will be transmitted to the terminal through the price, and finally consumers will pay the bill, or it will increase the operating cost of enterprises, reduce profits and even lead to losses. For example, after the free quota in the European carbon market is reduced, enterprises need to pay more for carbon emission quotas.
The EU is now the largest carbon market in the world, and it has experienced years of development from trial operation to formal operation. We can learn from its experience in system. However, I think that the main consideration of China’s carbon market now is how to form an advantage through policy combination boxing, so that the carbon market, CCER, green electricity trading and other policy instruments can complement each other and develop together. In the future, the carbon market is likely to be affected by CCER and green electricity trading. For example, some enterprises’ wind power and photovoltaic investment can be certified as CCER or green electricity, so there is no need to purchase too many carbon emission quotas.
Therefore, our carbon market does not need to benchmark foreign development, and it is not comparable. However, from the perspective of development goals, the global efforts are in the same direction, that is, adjusting the energy structure, and we are comparable in this regard. According to the data of World Energy Statistics, China is the country with the largest application scale of renewable energy such as wind power, photovoltaic and hydropower in the world. At the same time, China is also the world’s largest producer of renewable energy equipment, which provides industrial support for carbon emission reduction in China and around the world. Without these industries, carbon policy is a tree without roots and water without sources.
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