Wang Naixiang of Beijing Green Exchange: Give full play to the leading role of the voluntary emission reduction trading market and explore the coordinated development of the electricity and carbon market
Both the voluntary emission reduction trading market and the green electricity and green certificate trading market are incentive policies and measures. The support objects of the two overlap, which easily arouse everyone's attention and heated discussion on the development of the two markets. Based on sorting out the basic concepts and development origins of the voluntary emission reduction trading market and the green electricity and green certificate trading market, this paper puts forward thoughts and suggestions for the coordinated development of the two markets, hoping to help all walks of life correctly understand the differences and connections between the two markets and promote the coordinated development of the market under the guidance of relevant competent authorities.
Current situation of voluntary emission reduction trading market and green power and green certificate trading market
The voluntary emission reduction trading market is a market mechanism that encourages various social entities to independently and voluntarily develop greenhouse gas emission reduction projects and sell qualified certified emission reductions in the market to obtain corresponding emission reduction income. The products traded in the National Voluntary Greenhouse Gas Emission Reduction Trading Market are Certified Voluntary Emissions Emissions (CCER), which originate from voluntary emission reduction projects registered with the registration authority. These projects should be conducive to carbon reduction and increase sinks, and be able to avoid and reduce greenhouse gases. Emissions, or achieve greenhouse gas removal, and have additionality. CCER can be used to offset the payment of carbon emission quotas in the national carbon emissions trading market and local carbon emissions trading market, carbon neutrality in large-scale activities, and voluntary offset of corporate greenhouse gas emissions. On January 22, 2024, the national voluntary greenhouse gas emission reduction trading market was launched.
The green electricity market and the green certificate market represent two forms of trading for the environmental value of renewable energy respectively. The green electricity market is the green electricity trading market. It refers to the electricity trading market with green electricity as the subject matter. Electricity users can directly trade with power generation companies, purchase green electricity, and obtain corresponding green electricity consumption certification. It is a kind of "integration of certificates and electricity" trading model. my country has launched a green power trading pilot since August 2021, and initially only targets wind power and photovoltaic power generation. In February 2023, the "Notice on Matters Related to the Participation of Green Power Projects Receiving Central Government Subsidies" clarified that green power trading covers all renewable energy power generation projects. At present, there are two major trading centers for green power trading. The State Grid operating area is traded at the Beijing Electric Power Trading Center, and the Southern Power Grid operating area is traded at the Guangzhou Electric Power Trading Center.
The green certificate market is the renewable energy green power certificate trading market. The green certificate trading sells the energy attributes and environmental attributes of renewable energy separately. It is a trading model of "separation of certificates and electricity". my country's green certificate market started in 2017. In the early days, it was an electronic certificate issued for non-water renewable energy on-grid electricity, which was a certificate for consuming green electricity. In July 2023, the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration issued the "Notice on Fully Covering Renewable Energy Green Power Certificates to Promote Renewable Energy Power Consumption"(Development and Reform Energy [2023] No. 1044 Document), The scope of issuance of green certificates will be expanded to all renewable energy power projects, and it is clarified that green certificates are the only proof of the environmental attributes of green electricity and the only proof for identifying the production and consumption of green electricity.
The voluntary emission reduction trading market and the green power and green certificate trading market are both different and related
The voluntary emission reduction trading market and the green power and green certificate trading market are both important market-oriented carbon reduction tools. They are consistent in policy goals such as stimulating the development of renewable energy, promoting the optimization of the structure of the power industry, and promoting the realization of green and low-carbon transformation. However, different market rules are different, so there are both differences and connections between the two.
There are significant differences between the voluntary emission reduction trading market and the green power and green certificate trading market in five aspects.
First, the functional positioning is different. The main purpose of the green power and green certificate trading market is to serve the adjustment of energy structure, promote the consumption of renewable energy power, alleviate the pressure of renewable energy subsidies, and promote the energy production revolution and energy consumption revolution; while the purpose of the voluntary emission reduction trading market is to serve the whole society. Energy conservation and carbon reduction actions promote the application and promotion of green technologies, guide industrial transformation and low-carbon development, and provide support for addressing climate change.
Second, the coverage is different. The Green Power Green Certificate covers only renewable energy power generation projects, while the scope of voluntary emission reduction projects is much wider. In addition to renewable energy power generation projects, it also includes forestry carbon sinks, methane emission reduction, energy conservation and efficiency improvement.
Third, the principles of emission reduction are different. Green electricity has zero-carbon attributes. Under the conditions recognized by relevant carbon footprint standards or initiatives, purchasing green electricity means that the carbon emissions caused by enterprises 'electricity consumption are zero; while the emission reductions under the voluntary emission reduction mechanism represent enterprises. In addition to emission reduction efforts, other entities can obtain voluntary emission reductions through transactions and use them to offset their own carbon emissions. Different emission reduction principles also determine different emission reduction scopes. Green electricity and green certificates can only be used to reduce indirect emissions in Scope 2 if recognized by the carbon footprint rules of relevant international mechanisms (but according to the rules recently announced by the European Union, green certificates cannot be used in relevant carbon emission accounting such as the EU carbon border adjustment mechanism and battery carbon footprint), while voluntary emission reductions can be used to offset all direct and indirect emissions of enterprises.
Fourth, the mechanism requirements are different. The Green Power Green Certificate treats all renewable energy and electricity without discrimination, and has basically achieved full coverage; the voluntary emission reduction mechanism has strict requirements on the additionality of the project, that is, the project requires the incentives provided by the emission reduction mechanism to be implemented. With the advancement of technology and the reduction of investment costs, most current renewable energy power generation projects cannot be developed as voluntary emission reduction projects because they do not meet additionality standards.
Fifth, the trading rules are different. Green electricity and green certificates can only be traded once, and there have been no financing means such as mortgage and pledge with green certificates as the subject matter; CCER has no limit on the number of transactions and can be circulated in the secondary market. There are multiple financing methods based on CCER, such as mortgage, repurchase, bonds, etc.
There is also close connection between the voluntary emission reduction trading market and the green electricity and green certificate trading market. For example, in the carbon emissions trading market, the two have achieved functional "overlap" within a certain range. Judging from the connection between green electricity certificates and carbon emissions trading markets, currently, local carbon emissions trading markets such as Beijing, Tianjin, Hubei, and Shanghai have carried out exploration and practice of carbon emissions reduction for traceable green electricity purchased by key emission companies; In the newly released draft of the guidelines for greenhouse gas emission accounting and reporting in the aluminum smelting industry and cement clinker production industry, the emission factor of certifiable non-fossil electricity used by emission control companies will also be calculated as zero. The two markets, voluntary emission reduction trading and carbon emission trading, are interconnected and effectively connected through an offset mechanism. The "Interim Regulations on the Administration of Carbon Emissions Trading" stipulates that key emission units may purchase certified greenhouse gas emission reductions to pay their carbon emission quotas in accordance with relevant national regulations. For supply-side renewable energy power generation companies, they will face the choice of developing voluntary emission reduction projects or participating in green power and green certificate transactions to realize environmental value realization.
Promote the coordinated development of the voluntary emission reduction trading market and the green power and green certificate trading market
(1) The voluntary emission reduction trading market and the green power and green certificate trading market are in parallel.
Internationally, the Clean Development Mechanism (CDM), Certified Carbon Standards (VCS), etc. all regard renewable energy as an important support area, forming a situation in which a voluntary emission reduction trading mechanism and an international green certificate trading mechanism coexist and develop. At present, in my country, the green power and green certificate trading mechanism issues green certificates to all renewable energy power areas without distinction and full coverage. The voluntary emission reduction trading mechanism provides selective support for renewable energy projects in accordance with internationally accepted additionality requirements and methodological rules. Currently, only two methodologies in the renewable energy field, grid-connected offshore wind power generation and grid-connected thermal power generation, have been announced. Therefore, although the support objects of the two mechanisms overlap, the overlap is limited. In May 2022, the "Notice of the General Office of the State Council Forwarding the Implementation Plan of the National Development and Reform Commission and the National Energy Administration on Promoting the High-Quality Development of New Energy in the New Era"(Guo Ban Han [2022] No. 39) pointed out that it supports the inclusion of qualified new energy projects 'certified greenhouse gas emission reductions will be included in the national carbon emissions trading market for quota payment and offset. For emission reduction suppliers, the voluntary emission reduction mechanism provides a more attractive option for renewable energy power generation projects with strong additional characteristics. Project owners can comprehensively compare market prices, development costs, transaction difficulties, etc. On the basis of factors, they can choose between participating in voluntary emission reduction transactions or green power and green certificate transactions.
(2) The voluntary emission reduction trading market has incomparable advantages.
First of all, the voluntary emission reduction trading market plays a more leading role in promoting carbon emission reduction. On the one hand, the "additionality" requirements of the voluntary emission reduction mechanism can screen and guide the flow of funds and technology to areas and projects that cannot be successfully implemented due to difficulties such as poor financial indicators, lack of funds, and high uncertainty in the performance of new technologies, but that truly have emission reduction effects, require more support, and have a positive impact on environmental and social development, thereby achieving efficient and precise allocation of resources. On the other hand, the Green Power and Green Certificate only supports the field of renewable energy power generation, while voluntary emission reduction projects cover a wide range of areas, covering 16 fields including energy allocation, energy demand, energy industry, agriculture, carbon capture and utilization and/or sequestration. Energy conservation and emission reduction, carbon reduction and exchange increase projects are conducive to promoting the low-carbon transformation of society. At the same time, the voluntary emission reduction trading market has diverse participants, covering legal persons, other organizations and natural persons that comply with relevant national regulations, which helps to form a good atmosphere for the whole society to participate and jointly promote carbon emission reduction.
Secondly, the voluntary emission reduction trading market plays a more leading role in fulfilling international carbon emission reduction obligations. Voluntary emission reduction trading is an important institutional arrangement and participation channel to achieve my country's nationally determined contribution (NDC) goal to address climate change and implement the consensus on international cooperation in the future carbon market. First, the design of the national voluntary greenhouse gas emission reduction trading mechanism is directly benchmarked with the internationally recognized framework. On the basis of drawing on the clean development mechanism of the Kyoto Protocol, its technical specifications, development transactions, supervision and management have always been highly consistent with internationally recognized rules. Second, CCER can become an important starting point for implementing international cooperation in the carbon market. CCER has the conditions to achieve mutual recognition and interoperability with emission reduction mechanisms and standards such as VCS, the Gold Standard (GS), and the International Civil Aviation Carbon Reduction and Offset Market Mechanism (CORSIA). Facilitate international carbon credit market cooperation and voluntary emission reduction cross-border transactions. Third, CCER provides a powerful practice to demonstrate nationally determined contributions. Voluntary emission reduction projects can highlight the effectiveness of nationally determined contributions and focus on demonstrating my country's determination and actions to actively respond to climate change. At the same time, under the framework of international cooperation on carbon credit mechanisms stipulated in Article 6.2 of the Paris Agreement, carry out international cooperation based on CCER to help "Belt and Road" countries carry out carbon credit development and trading, and explore feasible ways to include my country's nationally independent contributions. Path, we can further leverage the influence of CCER in promoting international emission reductions.
Thirdly, voluntary emission reductions have continuous market demand in the context of "double carbon". As the work of carbon peaking and carbon neutrality continues to deepen, more and more market entities use the carbon market as an important starting point for implementing the "double carbon" goal, which will bring huge market demand to the carbon market. In the process of building a voluntary emission reduction trading market, diversified market demand and market ecology are gradually taking shape. First, in terms of performance offset, key emission control enterprises in the national carbon emissions trading market and local carbon emissions trading market can use CCER to offset part of their carbon emissions and complete annual performance tasks. At the same time, as the national carbon emissions trading market continues to expand, Relevant demand will gradually increase. Second, in terms of voluntary carbon neutrality, since the "double carbon" goal was put forward, carbon neutrality certification in large-scale activities, corporate operations, products and other dimensions has been in the ascendant, becoming an important option for many companies and organizations to actively carry out carbon peak carbon neutrality actions. Behind it is the growing demand of various market entities to fulfill their social responsibilities and enhance their influence through green development. Third, in terms of international cooperation, when conditions are ripe, CORSIA and international cooperation in the carbon market under the framework of the Paris Agreement will likely bring huge international market demand to CCER. Fourth, in terms of carbon neutrality goals, with the decomposition and implementation of carbon neutrality goals and tasks around 2030, CCER, as an auxiliary and alternative measure to complete carbon neutrality phased task indicators, will face increasing potential in the future. demand.
(3) Promote the coordinated development of the voluntary emission reduction trading market and the green power and green certificate trading market.
The voluntary emission reduction trading market and the green electricity and green certificate trading market are facing increasingly urgent needs for coordinated development in the future. On the one hand, the annual indirect carbon emission reductions represented by the current Green Power Green Certificate are expected to be as high as 1.7 billion tons. If all of them are included in the national carbon emissions trading market without distinction to deduct corporate carbon emissions, it will shake the foundation of the national carbon emissions trading market., and will also have a huge impact on the national voluntary greenhouse gas emission reduction trading market. On the other hand, a coordination mechanism has not yet been established between the two markets, and practical solutions need to be found. In the future, we can establish a cross-departmental electricity-carbon coordination working group to strengthen data sharing and information disclosure, continuously improve market transparency, and provide complete institutional guarantees and infrastructure for market participants to choose voluntary emission reduction transactions or green power and green certificate transactions. Achieving the coordinated development of the two markets will help better play the role of the two markets, form a more coordinated policy system, and improve the implementation effect of policies.
Author's unit: Beijing Green Exchange
