Heavy! The Ministry of Ecology and Environment solicited opinions on the inclusion of steel, cement and electrolytic aluminum industries into the national carbon market

On September 9, the Ministry of Ecology and Environment publicly solicited opinions on the "Work Plan for the National Carbon Emissions Trading Market to Cover the Cement, Steel, and Electrolytic Aluminum Industries (Draft for Comments)"(hereinafter referred to as the draft for comments), it is clear that the basic conditions of the building materials (cement), steel, and non-ferrous metals (electrolytic aluminum) industries are mature and can be included in the management of the national carbon emissions trading market (hereinafter referred to as the national carbon market) starting from 2024. By then, the proportion of emissions covered by the national carbon market in the national total will reach approximately 60%.

Why should we include it in the cement, steel, and electrolytic aluminum industries? Which companies are covered?

After three years of development, the overall operation of the national carbon market is stable, the institutional system is becoming increasingly improved, and the data quality has been comprehensively improved. China's carbon pricing mechanism with the carbon market as the core is taking shape. However, compared with the requirements and expectations of the Party Central Committee and the State Council, there are still deficiencies in the construction of the national carbon market. The outstanding manifestation is that the market currently only covers the power generation industry. The high homogenization of participating entities leads to low market activity, and the failure to fully play the role of the market mechanism., there is a big gap with mature carbon markets covering multiple industries such as the European Union.

Focusing on the expansion work, the Ministry of Ecology and Environment conducted in-depth investigations and studies using enterprise surveys, expert consultations and other methods, comprehensively considering factors such as greenhouse gas emission control requirements, industrial development, contribution to pollution reduction and carbon reduction, data quality basis, and response to international carbon barriers. A comprehensive assessment was conducted on the maturity of key industries such as steel, building materials, non-ferrous metals, petrochemicals, chemicals, paper and aviation to integrate into the carbon market, and a timetable and roadmap for each industry to be integrated into the market were scientifically determined.

According to the evaluation results, the basic conditions of the building materials (cement), steel, and non-ferrous metals (electrolytic aluminum) industries are mature and can be included in the national carbon market management.

In addition, while forming a roadmap for the implementation of the expansion, the Ministry of Ecology and Environment has further consolidated the data foundation, institutional foundation and hardware foundation for the expansion of the cement, steel, and electrolytic aluminum industries. At present, all preparations are basically ready.

Among these three industries, emission units with annual greenhouse gas emissions reaching 26,000 tons of carbon dioxide equivalent are included in the national carbon market management. The controlled gases in the power generation, cement, and steel industries are carbon dioxide, and the controlled gases in the electrolytic aluminum industry are carbon dioxide, carbon tetrafluoride (CF4), and carbon hexafluoride (C2F6).

In terms of emission scope, considering the integration with international carbon market rules, the cement, steel, and electrolytic aluminum industries only control greenhouse gas emissions directly generated by the use of fossil energy.

It will be carried out in two stages, leaving a buffer period to allow newly incorporated industries to familiarize themselves with the market

Considering that key emission units newly included in the market need to go through a period of time to master rules, familiarize themselves with the market, and improve management capabilities, the draft for comments proposes to promote market construction in two stages to ensure that the expansion work is carried out actively, steadily and orderly.

During the start-up and implementation stage, the main goals are to consolidate the foundation of carbon emission management in three industries and promote key emission units to familiarize themselves with market rules. Through 2-3 years of construction and operation, we will effectively consolidate the quality foundation of carbon emission data and enhance the participation ability of various entities., achieve a smooth start and expansion. Establish and improve the directory, data quality, quota, and transaction management systems for the cement, steel, and electrolytic aluminum industries, and complete the first performance of the three industries. Promote key emission units to familiarize themselves with accounting report verification, quota allocation, and market trading rules, gradually establish a low-carbon development awareness that "carbon emission has costs and carbon reduction has benefits", and improve carbon emission management capabilities. Quotas adopt the idea of intensity control, and implement all free distribution. Some advanced enterprises receive benefits, and some backward enterprises pay costs. Most enterprises 'quota profits and losses are basically the same, and the profit and loss amount accounts for a small proportion of the enterprise's operating income.

In the deepening and improvement stage, we will strengthen incentives and constraints to promote the innovative development of low-carbon technologies and the optimal allocation of carbon emission resources on a larger scale.

Enterprises don't have to worry. Without limiting their production capacity, there will be no large quota gap during the "experience period"

The draft for comments clarifies that during the start-up and implementation stage, the concept of intensity control is adopted to implement free quota allocation. The number of quotas obtained by enterprises is linked to product output (output). The absolute total amount of quotas is not preset, and the production capacity of enterprises is not limited. The greater the output, the more quotas are.

Using the performance evaluation method, performance management is carried out based on the carbon emission intensity per unit of output. Enterprises with low carbon emission intensity can earn income through quota surplus, enterprises with high carbon emission intensity pay carbon emission costs due to quota shortage, and the entire industry quota is basically balanced.

Fully taking into account the current situation that enterprises are unfamiliar with rules and have a weak foundation for data quality in the early stage, and according to a pilot period positioning similar to the "experience period", the quota surplus and gap of individual enterprises are controlled within a small range, and the quota between enterprises is reduced."The gap between the rich and the poor".

In the deepening and improvement stage, the quota allocation method has gradually shifted from the performance evaluation method to the benchmark method, benchmarking the advanced level of the industry, establishing a gradual and appropriate quota tightening mechanism with clear expectations, openness and transparency, and promoting the continuous decline of carbon emissions per unit of output.