Contribute "China's solution" to the global carbon market

As a global issue, climate change has attracted increasing attention. As a responsible and large developing country, China is implementing a "dual carbon" strategy to actively respond to climate change and plans to complete the world's largest reduction in carbon intensity in the shortest time in history. Among them, the carbon market has become an important policy tool to achieve "double carbon".

On July 21, the "National Carbon Market Development Report (2024)"(hereinafter referred to as the "Report") organized and compiled by the Ministry of Ecology and Environment was officially released at the "China Carbon Market Conference 2024". The "Report" systematically summarizes the latest construction progress of the national carbon market, demonstrates the effectiveness of market construction and operation, and also looks forward to the future development direction.

Build the world's largest carbon market, and its impact continues to expand

Data from the "Report" shows that a total of 2257 key emission units have been included in the second compliance cycle (2021 and 2022) of the national carbon emissions trading market, covering annual greenhouse gas emissions of approximately 5.1 billion tons of carbon dioxide equivalent, which is currently the largest global coverage of emissions. market. As of the end of 2023, the cumulative transaction volume of carbon emission quotas in the national carbon emissions trading market is 442 million tons, with a cumulative transaction volume of 24.919 billion yuan, and the scale has steadily increased.

The National Voluntary Greenhouse Gas Emission Reduction Trading Market launched in January 2024 has become another policy tool to promote the realization of the "double carbon" goal after the National Carbon Emissions Trading Market. The mandatory carbon market strictly controls the emission behavior of key emission units, and the voluntary carbon market encourages extensive participation by the whole society. The two carbon markets operate independently and are connected to each other through a quota payment and offset mechanism, jointly forming a national carbon market system and exerting policy synergy.

The "Report" pointed out that China's carbon market currently has an important influence on the global carbon price level and the effectiveness of the carbon trading mechanism, and the construction and operation of the national carbon market have attracted great attention from the international community. China's quota allocation method based on carbon emission intensity control goals demonstrates the flexibility and applicability advantages of the carbon market mechanism, and contributes the "China Plan" to the innovation of global carbon market mechanism.

Scale, price and enthusiasm are improving, and vitality is steadily improving

Judging from the operation of the national carbon market, there are three major characteristics.

The transaction scale has gradually expanded. The "Report" shows that the cumulative transaction volume and transaction volume of carbon emission quotas in the second performance cycle of the national carbon emissions trading market increased by 47.01% and 125.26% respectively compared with the first performance cycle. The transaction volume of listing agreements and bulk agreement transactions increased by 33.93% and 49.73% respectively. In July 2023, the Ministry of Ecology and Environment issued a notice on the payment of carbon emission quotas in 2021 and 2022. Various localities actively organized key emission units to formulate trading plans, and the transaction volume continued to increase from August to October. In the first half of 2024, the average monthly transaction volume was 3.6682 million tons, a year-on-year increase of 174.9%.

Trading prices were stable and rising. The closing price of the comprehensive price for the second performance cycle of the national carbon emissions trading market is 50-82 yuan/ton. At the end of 2023, the comprehensive price closing price was 79.42 yuan/ton, up 65.46% from the opening price on the first day of opening and 46.48% from the closing price of the first performance cycle. With the promulgation and implementation of the Interim Regulations on the Administration of Carbon Emissions Trading and the continuous advancement of related work in the third compliance cycle, the overall market transaction price has steadily increased, and the comprehensive price closing price exceeded 100 yuan/ton for the first time on April 24, 2024.

Trading entities are more active. Compared with the first performance cycle, 338 new trading accounts were opened in the national carbon emissions trading market from 2022 to 2023. The number of key emission units participating in trading increased by 31.79%, and the number of key emission units participating in trading multiple times increased by 32.14%. The number of key emission units with a transaction volume exceeding one million tons increased by 77.59%, while the number of key emission units using both trading models of listing agreements and block agreements increased by 36.87%. Key emission units formulated trading plans early based on their own conditions. The peak month of trading volume was advanced from December to October, and the number of days of active trading increased significantly. After the end of the second compliance cycle, the average monthly transaction volume and the average monthly number of key emission units participating in the transaction in the first half of 2024 increased by 49.54% and 90.79% respectively compared with the same period in 2022.

Promote green and low-carbon transformation and demonstrate development results

The "Report" pointed out that the national carbon market provides an effective way to properly handle the relationship between economic development and carbon emission reduction, and has achieved remarkable results in promoting green and low-carbon transformation.

First, enterprises 'carbon emission management capabilities have been effectively improved, and the industry's emission reduction effects have gradually emerged. The national carbon market has consolidated the main responsibility of enterprises for carbon emission reduction and established a low-carbon awareness in the whole society that "carbon emission has costs and carbon reduction has benefits". Basically, key emission units have carried out measurement of elemental carbon content. By promoting enterprises to flexibly reduce emissions, the guiding role of the carbon market in controlling greenhouse gas emissions and promoting energy structure adjustment has become increasingly apparent. In 2023, the national thermal power carbon emission intensity will decrease by 2.38% compared with 2018, and the power carbon emission intensity will decrease by 8.78%.

Second, the basic role of carbon pricing has been initially played to promote green, low-carbon and high-quality development. In April 2024, the closing price of the national carbon emissions trading market exceeded 100 yuan per ton for the first time. The green financial attributes of carbon emissions rights have been recognized by more and more financial institutions. The trading price of carbon emissions rights has anchored benchmark prices for climate investment and financing, carbon asset management, quota pledge, etc., leveraging more green and low-carbon investment, promoting energy efficiency improvement and energy structure adjustment.

Third, the foundation for carbon emission statistical accounting has been consolidated and improved, and the technical service system and market have begun to take shape. We have explored and established a carbon emission accounting system for key industries that is in line with China's actual conditions, providing key data support for the formulation and release of carbon dioxide emission factors and the establishment and improvement of a carbon footprint management system. By strengthening institutional management, clarifying responsibilities and obligations, and optimizing technical specifications, a large number of professional talents and related institutions have been cultivated, laying a solid foundation for promoting the realization of "double carbon". In 2023, more than 50 consulting agencies, more than 450 inspection and testing agencies, and nearly 100 verification agencies will provide third-party technical services to key emission units and government authorities.

Looking to the future, the "Report" proposes that the Chinese government will accelerate "building a more effective, more dynamic, and more internationally influential carbon market" to make greater contributions to addressing global climate change.