This year, domestic carbon prices have reached a new high, and the cumulative increase has exceeded 30%.
Since the beginning of this year, the price of carbon emission allowances (referred to as "carbon price") in the national carbon emission trading market has been rising. So far, the carbon price has doubled compared with the opening price in 2021, and the increase has exceeded 30% this year. The industry generally believes that although it has reached a new high, the fluctuation of domestic carbon prices is still within a reasonable range.
April is an important node in the process of rising carbon prices this year. On April 24, the carbon price broke through the 100 yuan/ton mark for the first time, and has since hit record highs one after another. On April 29, the carbon price closed at 103.47 yuan/ton, the highest point since the market opened in 2021. After May 7, carbon prices have fallen, but they remain high. As of May 15, the carbon price closed at 97 yuan/ton, double the price of 48 yuan/ton when the market opened in July 2021. Since the beginning of this year, carbon prices have risen by more than 30%.
In addition, after entering April, unlike the overall trading willingness of the market after the compliance period in previous years, the purchase demand, trading volume and price of carbon allowances are at a high level in the same period in history.
What is the reason for the increase in carbon prices this year? On the supply side, the market's concern about tighter quotas is an important factor. In the early stage of the carbon market, in order to avoid a large impact on emission control enterprises, the allocation of allowances for the first compliance period of the national carbon market is relatively loose and free. According to the "Interim Regulations on the Administration of Carbon Emission Trading", which came into effect on May 1, the national carbon emission trading market will gradually implement a combination of free allocation and paid allocation of carbon allowances. In addition, the market also expects that carbon allowances will be tightened across the board in the next step, driving the current round of carbon price increases. According to Zhang Zhongxiang, a professor at Tianjin University, the reduction of the benchmark value of quota allocation for power generation enterprises in the second compliance period has caused more emission control enterprises to have a quota gap, resulting in a further increase in market demand. In the case of limited existing quota stock and expected further reduction of quota in the future, key emission control units will cherish the quota more and choose to refrain from selling it for the sake of future performance.
From the demand side, the expansion expectation has further boosted carbon trading. Chen Hongbo, deputy dean of the School of Applied Economics at the University of Chinese Academy of Social Sciences, told reporters that the recent rise in carbon prices is related to the expected expansion of the carbon market. Since the launch of the national carbon market, there have been calls for expanding the capacity from a single power sector to key industries such as steel, building materials, nonferrous metals, petrochemicals, and chemicals. At the same time, the State Council and relevant competent authorities are also continuing to prepare for the expansion. In October last year, the Ministry of Ecology and Environment (MEE) issued the Notice on Reporting and Verification of Greenhouse Gas Emissions from Enterprises in Some Key Industries from 2023 to 2025, marking the start of the basic work for the expansion of the national carbon market. In March and April this year, the Ministry of Ecology and Environment (MEE) issued draft guidelines for carbon accounting, reporting and verification for the aluminium smelting industry and the cement clinker industry, which was seen as a strong signal for the expansion of the carbon market. Driven by the expected expansion, the competition for carbon allowances has intensified, leading to higher prices.
Although carbon prices have hit a new high, the industry believes that compared with major foreign carbon markets, domestic allowance prices still have room to rise. Chen Hongbo said that the current carbon price of about 100 yuan is in a reasonable range, and it will still be bullish in the long run.
Ren Daming, a researcher at the Beijing News Zero Carbon Research Institute, said that the price fluctuations in the carbon market directly affect the performance costs and economic benefits of enterprises, and that emission control enterprises can reduce their own carbon emissions and carbon market performance costs by participating in green electricity trading.
