This year's government work report proposes to improve the ability of carbon emission statistical accounting and verification, establish a carbon footprint management system, and expand the coverage of the national carbon market industry when deploying the work tasks for 2024. What is the relationship between these three specific tasks? What is the significance of doing these tasks well for China to achieve the "double carbon" goal? How should enterprises in related industries respond to these work requirements? Focusing on these issues, this reporter interviewed Zhang Junjie, director of the sustainable investment research program at Duke Kunshan University.
Junjie Zhang is director of the Sustainable Investing Research Program at Duke Kunshan University
China Environment News: The government work report mentions that one of the tasks in 2024 is to actively and steadily promote carbon peak and carbon neutrality, which specifically mentions the need to improve the ability of carbon emission statistical accounting and verification, establish a carbon footprint management system, and expand the coverage of the national carbon market. What is the relationship between these three tasks, and what is the significance of doing a good job in these three specific tasks?
Zhang Junjie:learnpracticeAfter completing the content of the government work report on responding to climate change and carrying out "dual carbon" work, I have two feelings. First, in the process of responding to climate change and mitigating climate change, we have begun to adopt more and more scientific means to identify the most critical issues at present. Second, it shows our firm determination to tackle climate change.
Improving the capacity of carbon emission statistical accounting and verification, establishing a carbon footprint management system, and expanding the coverage of the national carbon market industry are closely linked.
Improving carbon accounting capabilities is the foundation of efforts to address climate change. Whether it is tracing the carbon footprint of production and consumption activities, or including other industries in the scope of the national carbon market, accurate and reliable data is needed as the foundation. The effectiveness of carbon emissions trading is based on open, transparent and credible data. Improving the ability of carbon emission statistical accounting and verification and consolidating the data foundation are the cornerstones of the stable and healthy operation of the national carbon market, so the government work report puts it in the first place to promote the "dual carbon" work.
The establishment of a carbon footprint management system can help enterprises grasp the carbon emission level of the whole life cycle of raw materials, processes, and logistics. This will not only help enterprises better meet the compliance needs of domestic carbon emissions, but also help enterprises establish a green and low-carbon supply chain to better meet the requirements of international supply chains. At present, international trade customers have put forward clear requirements for the carbon footprint of upstream suppliers, and the EU is also establishing a carbon border adjustment mechanism. In this case, a scientific and reasonable carbon accounting system is very important for establishing a reliable carbon footprint management system, and it is also a necessary condition for Chinese enterprises to go out and participate in international competition.
With the gradual improvement of the national carbon market, more and more enterprises will participate in carbon trading, which can also force enterprises in these industries to improve the efficiency of carbon accounting and the quality of carbon footprint management systems in various industries.
China Environment News: At present, what is the progress of China's carbon emission statistical accounting and verification and carbon footprint management?
Zhang Junjie:The Ministry of Ecology and Environment (MEE) has been promoting the construction and improvement of carbon accounting methods and systems to ensure the availability, accuracy and reliability of carbon emission data, and to make it a prerequisite for the improvement and development of the national carbon market. The "Interim Regulations on the Administration of Carbon Emission Trading" issued not long ago will ensure data quality, prevent and punish carbon emission data fraud as important content, and carbon accounting and other related work will have a legal basis from now on.
The carbon footprint management system is also in full swing. In November 2023, the National Development and Reform Commission and other five departments jointly issued the "Opinions on Accelerating the Establishment of a Product Carbon Footprint Management System", which clearly put forward the work requirements related to product carbon footprint from the aspects of carbon footprint accounting rules and standards, database construction, carbon label certification, carbon footprint application scenarios, international convergence and mutual recognition. This makes Chinese enterprises have a basis for reporting and disclosing their carbon footprints, and also lays a good foundation for China to establish its own green and low-carbon supply chain and green consumption network. In general, the carbon footprint management system is conducive to both international trade cooperation and domestic industry transformation.
China Environment News: Which industries and enterprises have done a better job in carbon accounting and carbon footprint management, and what can it bring?
Zhang Junjie:We have evaluated the carbon accounting and carbon footprint management of listed companies. These information disclosure channels are diversified and in different forms, such as financial reports, ESG reports, sustainability reports, social responsibility reports and other channels.
We focus on eight major industries, including electric power, petrochemicals, nonferrous metals, chemicals, papermaking, building materials, iron and steel, and aviation, which are relatively carbon intensive. On the whole, the disclosure rate and quality of climate change-related information in these industries are constantly improving. The thermal power industry has done a better job in carbon accounting, mainly because the thermal power industry has been included in the national carbon market and has mandatory requirements for carbon accounting. The petrochemical industry needs to be improved, and there is great room for improvement in both the disclosure rate and the quality of disclosure. These eight industries have a significant impact on China's carbon emissions, and should take the lead in carbon accounting and carbon footprint management.
In addition to high-emitting industries, we also focus on carbon accounting and carbon footprint management in the financial industry. Although the financial industry itself emits very little, the carbon emissions of the financial assets they hold are huge. For example, for commercial banks, whether their credit flows to high-carbon or low-carbon industries has an important impact on the low-carbon transition of the entire economy. On the whole, the financial industry has made good progress in carbon accounting and climate information disclosure, and the disclosure rate is basically the same as the international level. As financial institutions pay more and more attention to climate change, it is believed that it will also provide important support for the low-carbon transformation of high-carbon industries and the green financing of low-carbon industries.
However, we also see that there are also great challenges in carbon accounting and carbon footprint management. In particular, there is a significant data gap for Scope 3 GHG emissions, i.e. all indirect emissions generated upstream and downstream in the value chain. A large number of small and medium-sized enterprises have not yet established a carbon emission accounting system, and lack quality control measures for carbon emission data, so they cannot manage their carbon footprint. This year's government work report clearly puts forward the requirements for carbon accounting and carbon footprint management, hoping to solve the problems of carbon emission data availability, controllability and comparability.
China Environment News: The Interim Regulations on the Administration of Carbon Emission Trading released a few days ago also mention the need to accelerate the expansion of the national carbon market. What preparations should be made to promote expansion?
Zhang Junjie:The expansion of the national carbon market is essentially a question of whether China's climate policy should be increased at this stage. To promote the expansion of the carbon market, two issues need to be considered first.
The first is the fairness of the international carbon price, which is a prerequisite for expansion. Specifically, it is necessary to look at the carbon pricing level of countries with similar development levels and industrial structures to China. At present, many countries in a similar industrial niche as China lag far behind China in terms of carbon pricing. In this case, we must first help these countries establish carbon pricing systems to prevent carbon leakage and ensure fair industrial competition.
The second is the issue of orderly and just transition. The expansion is to promote the low-carbon transition of high-carbon industries, not to "force them back". An orderly transition must consider both technical feasibility and financial feasibility. A just transition needs to consider the livelihoods of those who work, as well as the economic and social transformation of the regions in which the industry operates.
Only when the above two prerequisites are met can the expansion of the national carbon market be carried out with high quality.
China Environment News: Regarding the expansion of the carbon market, the Ministry of Ecology and Environment has been actively promoting relevant work. What preparations should enterprises in related fields and industries do?
Zhang Junjie:I believe that the specific expansion work includes three levels: the expansion of the emission control industry, the expansion of carbon market participants, and the expansion of carbon market trading products.
The first is the expansion of the emission control industry. Enterprises in related industries need to consolidate their data foundation and ensure data quality. At present, only the thermal power industry has been included in the national carbon market, and with the promotion of the "dual carbon" work, more and more high-carbon enterprises will be included in the carbon market in the future. After inclusion, the most important work is data quality management, that is, carbon accounting, and enterprises in related industries should do it as soon as possible. From the perspective of the overall situation of the industries to be included in the national carbon market, the carbon accounting work of the industries that are more affected by the international supply chain is relatively good, and the enterprises in the less affected industries are doing more slowly. Doing a good job in carbon accounting is conducive to a clear understanding of the surplus and deficit of carbon quotas of one's own enterprises, which is the strategic basis for enterprises to formulate carbon emission planning and carbon trading.
The second is the expansion of carbon market trading entities. At present, only emission control enterprises are allowed to enter the national carbon market for trading, and the trading is mainly for the purpose of fulfilling the contract. However, carbon emission trading is a market mechanism in the final analysis, which is to achieve the established carbon emission reduction target at the lowest cost, and enterprises to minimize the cost through trading, which involves the liquidity of carbon allowances. At present, the activity of China's carbon market is still relatively low, and the price discovery function needs to be improved. In this case, in addition to the participation of emission control enterprises in carbon trading, it is also possible to consider extending the trading entities to non-emission control enterprises, especially financial institutions, in the future to help improve the liquidity of the carbon market.
The third is the expansion of the types of trading products. The national carbon market is currently only available for spot trading. However, corporate carbon emission reduction and climate transition involve medium- and long-term planning, and they need to allocate their carbon emissions in time and space. If there is only a spot trading market, it is difficult for enterprises to achieve long-term allocation such as 5 years and 10 years, so it is necessary to enrich the types of trading products, including carbon futures and carbon forward products, to help enterprises better plan carbon emissions.