Carbon market expansion and elimination of "Scope 2", what is the impact of green electricity market
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 "Plan") recently released by the Ministry of Ecology and Environment clearly states that the cement, steel, and electrolytic aluminum industries will be in 2024 The year will enter the first control year, and the first performance will be completed before the end of 2025.
The plan determines the scope of control. The cement, steel, and electrolytic aluminum industries control direct emissions from fossil fuel combustion, industrial processes, etc. The type of greenhouse gas controlled by the cement and steel industries is carbon dioxide, and the types of greenhouse gas controlled by the electrolytic aluminum industry are carbon dioxide, carbon tetrafluoride (CF4) and carbon hexafluoride (C2F6).
The description of the scope of control "direct emissions from fossil fuel combustion, industrial processes, etc." means that the scope of greenhouse gas control in China's mandatory carbon market will be clearly defined as "Scope 1" direct emissions, and will no longer cover "Scope 2", that is, indirect greenhouse gas emissions generated by purchased electricity, steam, heating or cooling by enterprises are controlled.
It is in line with international standards and avoids "double accountability"
In the context of the carbon market, the control of "Scope 2" is an important part of achieving comprehensive emission reduction goals, because it involves the indirect impact of companies on energy use efficiency and carbon emissions during production and operations.
In the process of expanding the carbon market this time, the treatment of "Scope 2" was adopted in line with international standards. This decision will help ensure the fairness and efficiency of the market and promote docking with the international carbon market. Take the European Union as an example. Mature carbon markets such as the European Union only control direct emissions. The new industries included are also industries affected by the EU Carbon Border Regulation Mechanism (CBAM). The "Plan" proposes to include direct emissions, which is consistent with the top-level design of the EU carbon market.
This adjustment of China's carbon market not only avoids inconsistency with the international market, but also helps promote the interconnection of domestic and foreign markets and improve the overall efficiency and liquidity of the market.
In addition, the elimination of "Scope 2" is mainly to avoid the problem of "double accountability". In the carbon market, if direct emissions from the power industry and indirect emissions from power consumer companies are controlled at the same time, the same ton of emissions will be calculated twice, resulting in unfairness. Eliminating "Scope 2" will help simplify the operation of the carbon market, avoid chaos in price signals, and ensure the healthy development of the carbon emissions trading market.
Wang Jun, founder of Climate Future and author of "Carbon Neutrality Era", told the Beijing News Zero Carbon Research Institute that there is another reason for the removal of "Scope 2" this time, the problem of fair competition caused by the imbalance of green power regions. If the expansion of the carbon market is included in "Scope 2" and green electricity deductions are allowed, then the industry competitiveness brought by the regional advantages of renewable power will surpass all other advantages, which will lead to companies with high energy efficiency and low carbon levels in this carbon competition. Not necessarily dominant, which is what the carbon market does not want to see.
Excluding "Scope 2", will the green electricity market be severely hit?
Wang Jun said that eliminating "Scope 2" will have some impact on the green electricity market. For example, it may reduce the motivation of some companies to purchase green electricity. If our companies eliminate "Scope 2", there will be no carbon cost for this part of electricity emissions. The cost of upstream power plants is not transmitted downstream, which is unfavorable to the emission reduction of this part of electricity.
Despite this, eliminating "Scope 2" does not mean that the demand for green electricity by emission control companies will completely disappear. With the global emphasis on green and low-carbon development, many companies still have the motivation to purchase green electricity due to their brand image, market competitiveness and international trade needs.
In addition, the carbon market can encourage power generation companies to reduce carbon emissions through carbon prices, which in turn affects the low-carbonization of the entire power grid. As a result, the direct emissions of power companies will be reduced, and the indirect emissions of all power users will also be reduced; at the same time, we are also We are using other policies and market mechanisms to encourage companies to improve energy efficiency and use renewable energy.
Recently, the National Development and Reform Commission and the National Energy Administration jointly issued the "Notice on the Responsibilities and Weights of Renewable Energy and Power Consumption and Related Matters in 2024", which issued the responsibility weights for total consumption and non-hydropower consumption in various regions in 2024 and the expected value for 2025., and for the first time, a new green power consumption ratio in the electrolytic aluminum industry was established.
The National Energy Administration proposed a number of measures in the "Notice on Doing a Good Job in New Energy Consumption and Ensuring the High-Quality Development of New Energy Sources", including accelerating the construction of new energy supporting power grid projects, improving power grid resource allocation capabilities, and giving full play to the power market mechanism. Role, etc., to ensure the rational use and consumption of new energy sources. These measures will help improve the consumption capacity of green electricity, reduce the phenomenon of abandonment of wind and light, and promote the high-quality development of new energy sources.
It is necessary to see the positive impact of eliminating "Scope 2" on enterprises 'self-drive ability to reduce carbon emissions
Although the power to save electricity may be reduced after the accounting of "indirect emissions" is eliminated, energy-saving technologies are still an effective means to improve energy efficiency and reduce costs for industries with large space for energy conservation and emission reduction transformation. In addition, as more industries are included in the carbon market, the total control of carbon emissions will become stricter, which will prompt companies to seek various emission reduction methods, including energy-saving technologies.
In general, removing "Scope 2" may cause some chain reactions in the short term, such as the adjustment of the role of the green electricity and green certificate market and the impact on power-carbon linkage. The linkage mechanism between the carbon market and the electricity market may need to be reconsidered. After eliminating "Scope 2", the coupling between the two markets may be reduced, but it is still possible to achieve linkage through other mechanisms (such as CCER).
Even so, we need to see the positive impact of eliminating "Scope 2" on enterprises 'self-drive to reduce carbon emissions. Enterprises' demand for green electricity may shift from compliance-driven to voluntary and strategic purchases. These positive impacts will help Enterprises remain competitive in the new market environment while promoting the entire industry to develop in a greener and low-carbon direction.
