This newspaper interviewed Du Tao, a professor at Northeastern University: What do you think about the expansion of the carbon market? What should I do?

The General Office of the Ministry of Ecology and Environment recently released the "Work Plan for the National Carbon Emissions Trading Market to Cover the Cement, Steel, and Electrolytic Aluminum Industries (Draft for Comments)", which marks the official implementation of the expansion of the carbon market. What is the significance of including key emission industries such as steel, cement, and electrolytic aluminum into the carbon emissions trading market? Why choose these three industries? How should companies respond to the expansion of the carbon market? In response to these questions, our reporter interviewed Du Tao, a professor and doctoral supervisor at Northeastern University.

Du Tao is a professor and doctoral supervisor at Northeastern University, director of the National Key Laboratory of Environmental Protection and Ecological Industry, director of the Institute of Industrial Ecology and Energy Conservation and Emission Reduction, director of the Chinese Metal Society, chairman of the Energy and Thermal Engineering Branch, and deputy chairman of the Industrial Ecology Committee of the Chinese Ecological Society, chairman of the Education and Guidance Committee for Energy and Power Major in Liaoning Province, a famous teaching teacher in Liaoning Province, an outstanding teacher of the Baosteel Education Award, and an editorial member of "China Metallurgy". The main research directions are: energy conservation and emission reduction in industrial systems, low-carbon energy and carbon neutrality technologies, collaborative optimization of energy conservation and carbon reduction and efficiency improvement, CO2 capture and utilization (CCUS), industrial ecology, etc.

China Environment News: What is the significance of including key emission industries such as steel, cement, and electrolytic aluminum into the carbon emissions trading market? Why choose the three industries of steel, cement, and electrolytic aluminum?

Du Tao:The three industries of steel, cement, and electrolytic aluminum all play a pivotal role on a global scale. They are important pillar industries of the national economy and provide a material foundation for economic development. Their products are widely used in construction, transportation, equipment manufacturing, aerospace, National defense and other fields. In 2023, my country's steel, cement, and electrolytic aluminum output will account for approximately 54%, 50%, and 59% of the world's total output respectively, highlighting the important position of these industries in the international market.

At the same time, they are all high-energy-consuming industries, and large output also means high total energy consumption and large total carbon emissions. Therefore, these industries are also the key targets of my country's carbon emission reduction work. Among them, the steel industry accounts for about 15% of the country's total carbon emissions, the cement industry accounts for about 9%, and the electrolytic aluminum industry accounts for about 5%, accounting for about 29% of the country's total emissions. After incorporating these industries into the carbon emissions trading market, market-oriented means can be combined with government supervision to conduct substantive supervision and assessment of their carbon emissions, which will help achieve my country's "double carbon" strategic goals. This is One of the most important meanings of this carbon market expansion.

The carbon emissions trading system is a management means to promote carbon emission reduction through a price mechanism. After an enterprise is included in the carbon emissions trading market, the amount of carbon emissions of the enterprise will directly affect production costs, market competitiveness, etc. The carbon market price adjustment mechanism can force the enterprise to be enthusiastic about carbon emission reduction, allowing it to proactively adopt emission reduction measures and gain profit margins. Many companies are now facing downward pressure on the economy and still hold a wait-and-see attitude towards the innovation and application of green and low-carbon technologies. This situation will change after the carbon market expands. Because companies will find that if they do not carry out technological innovation, they will have to invest more money to purchase carbon quotas. It can be seen that the expansion of the carbon market will promote enterprises to increase investment in low-carbon technology innovation, and then promote the green transformation and upgrading of enterprises.

At the same time, the expansion of the carbon market is also conducive to improving enterprises and the public's awareness of the ecological environment. This can lay a mass foundation for companies to formulate carbon emission reduction strategies and establish carbon management institutions in the future, making it easier to win consensus.

In addition, in the context of the global response to climate change, my country is also facing pressure from the international community on carbon emission reduction policies. For example, the European Union's Carbon Border Adjustment Mechanism (CBAM, also known as "carbon tariffs") imposes carbon tariffs on high-carbon products such as steel, cement, and aluminum imported from abroad, which has a greater impact on exporting countries including my country. Low cost is one of the export advantages of my country's steel, cement, and electrolytic aluminum products. However, it is estimated that in the current economic environment, if carbon tariffs are added to these three types of export products, the profit space will be greatly squeezed or even not profitable. Integrating these three industries into the carbon market and reducing the carbon price difference with exporting countries through market regulation can reduce carbon tariffs on export products, help these key emission companies adapt to international carbon tariff requirements as soon as possible, reduce export costs, and improve International market competitiveness and actively respond to possible international carbon barriers.

China Environment News: In recent years, what preparations has my country made to promote the expansion of the carbon market?

Du Tao:In fact, the government, industry associations, and enterprises have been preparing for the expansion of the carbon market for a long time.

At the government level, previously, the Ministry of Ecology and Environment and other government departments have successively issued the "Guidelines for Accounting and Reporting of Greenhouse Gas Emissions for Enterprises" and the "Technical Guidelines for Verification of Greenhouse Gas Emissions for Enterprises", which clarify the accounting methods of greenhouse gases for enterprises and guide enterprises on how to calculate and submit their own reports, verification data, etc. On September 9, the General Office of the Ministry of Ecology and Environment issued the "Work Plan for the National Carbon Emissions Trading Market to Cover the Cement, Steel, and Electrolytic Aluminum Industries (Draft for Comments)", which clarified the implementation steps and timetable, and made a top-level design. In addition, the state has also issued a series of relevant institutional documents, such as the "Interim Regulations on the Management of Carbon Emissions Trading", which have established a basic institutional framework for carbon emissions trading and formed a sound institutional system, which provides a smooth operation and gradual expansion of my country's carbon market. Legal and institutional guarantees are provided. This carbon market expansion is only the beginning, and the third and fourth batches of key emission industries will be included later.

At the industry association level, China Iron and Steel Industry Association has established the "EPD (Environmental Products Statement) Platform for the Whole Steel Industry Chain of China Steel Industry Chain", which was officially launched in May 2022. It is the first EPD platform to operate in a standardized manner in China's industrial field. In September this year, it signed a platform mutual recognition and cooperation memorandum with the Swedish EPD platform and the Italian EPD platform. Enterprises regularly publish comprehensive information on the environmental impact of the entire life cycle of products on the platform, including greenhouse gas emission information, etc., through the EPD platform to display the green and low-carbon attributes of steel materials and promote the green and low-carbon development of the industry.

In addition, China Iron and Steel Industry Association launched the "Three-Year Action Plan for Energy Efficiency Benchmarking in the Steel Industry" in December 2022. The extreme energy efficiency project entered the substantive implementation stage. At the same time, it issued a list of feasible technologies for extreme energy efficiency to guide enterprises to improve energy efficiency and reduce carbon emissions. This year, this project has entered the acceptance stage, and it is expected that the production capacity of 150 to 200 million tons will reach the energy efficiency benchmark level by the end of the year. This is another key project to promote energy conservation and carbon reduction in the steel industry after the "Ultra-Low Emission Project". It is committed to cultivating and building a "dual-carbon best practice energy efficiency benchmark demonstration plant".

At the enterprise level, taking the steel industry as an example, after my country's "double carbon" strategic goal was put forward, various steel companies attached great importance to it and set up their own carbon peak roadmap under the guidance of China Iron and Steel Industry Association. A large number of companies such as China Baowu Group, Shougang Group, and Angang Group have taken the initiative to release their own carbon reduction roadmap and carbon peak timetable. In addition, many companies have joined forces with universities and scientific research institutes to hold exchanges, seminars and trainings related to carbon accounting, and are actively preparing. At present, many steel companies have established special carbon accounting and carbon management departments. It can be said that companies have taken the initiative to make adequate preparations in advance.

China Environment News: According to your understanding, what problems may key emission industries such as steel, cement, and electrolytic aluminum face when they are included in the carbon emissions trading market?

Du Tao:The power industry process is relatively simple, and the data is complete and easy to obtain. Steel, cement, and electrolytic aluminum are all industries with high energy consumption, long and complex processes. Different companies have different production processes. For example, some steel companies have long blast furnaces and converters processes, and some have short electric furnaces, and carbon emission data differ greatly. A common problem faced by enterprises at present is the relatively weak data foundation. In the process of helping companies conduct carbon accounting, we found that many data were missing, contradictory and inaccurate. This brings certain difficulties to accounting.

At present, although the basic accounting methods have been determined, the published accounting methods do not include many details and may require further guidance from the government, industry associations and other departments. Relevant departments can provide unified guidance on reporting, accounting and supervision, and establish a unified standard. For example, where are the boundaries of carbon accounting? Are the carbon emissions from blast furnace gas utilization and unfavorable times calculated differently in steel enterprises? How to submit the data? To what extent is the data disclosed? Wait. These details need to be further clarified by the state to provide enterprises with unified principles to follow.

Another problem that may be faced is that companies are new to the carbon market, do not know much about the rules of the carbon market, and have insufficient experience in managing carbon assets. They are not able to operate comfortably in the carbon market for the time being. Enterprises need to constantly adapt. We believe that as companies accumulate experience in entering the carbon market, these problems will be gradually solved.

There are still some companies who are worried that different provinces have different energy structures and industrial structures. If a unified power emission factor is used, it may bring problems such as unfairness. We hope that when refining the carbon emissions trading rules in the future, we can fully consider the actual situation of each province and implement differentiated carbon reduction policies and standards, that is, different provinces must calculate emission factors based on the actual industrial structure and energy structure. Only in this way can differentiated and refined emission reduction plans be more scientific and fair, and can the enthusiasm of various regions be mobilized. Only then can we promote the reasonable distribution and circulation of carbon emissions trading rights among different provinces and regions through market-oriented means. Carbon emission reduction is a big game of chess across the country. Achieving the "double carbon" strategic goal requires the coordination of various industries and regions.

China Environment News: On September 9, the General Office of the Ministry of Ecology and Environment issued the "Work Plan for the National Carbon Emissions Trading Market to Cover the Cement, Steel, and Electrolytic Aluminum Industries (Draft for Comments)." What are the characteristics and highlights of this draft for comments?

Du Tao:The "National Carbon Emissions Trading Market Work Plan for Covering the Cement, Steel, and Electrolytic Aluminum Industries (Draft for Comments)" is a milestone in the development of the carbon market, which means that the development of the carbon market has entered a new stage, and the development of my country's carbon market has taken a great step forward.

As we have just mentioned, key emission industries such as steel, cement, and electrolytic aluminum still face many problems and inadaptability when they are included in carbon emissions trading. One of the great highlights of the work plan is that in accordance with the working idea of "implementing while improving", it has been clarified that the work related to integrating the cement, steel, and electrolytic aluminum industries into the national carbon emissions trading market will be carried out in two stages. 2024-2026 2027 is the start-up and implementation stage, and after 2027 is the deepening and improvement stage. In the start-up and implementation stage, the main tasks are still to consolidate the foundation of carbon emission management and help enterprises familiarize themselves with market rules, and debug the rules in practice, giving enterprises enough time to adapt, understand and master the methods to optimize the allocation of carbon emission resources. This plan also lays the foundation for the future integration of petrochemical and other industries into the carbon market. In the deepening of the improvement stage, we will substantively strengthen the degree of incentives and constraints, and promote the innovative development of low-carbon technologies and the optimal allocation of carbon resources on a larger scale through market means.

China Environment News: What impact may this carbon market expansion have on carbon prices? What impact will it have on steel, cement, electrolytic aluminum companies and even the entire industry?

Du Tao:This carbon market expansion will include about 1500 companies in three industries, increasing carbon emissions by more than 3 billion tons. The increase in market participants will increase the trading activity of the carbon market, increase the transaction volume, and may promote a certain increase in carbon prices, and further stimulate and mobilize the vitality of the carbon market. Therefore, this expansion of the carbon market is expected to be good for the trend of carbon prices.

For companies in the three industries of steel, cement and electrolytic aluminum, it is an opportunity and a challenge. For companies that have not taken effective emission reduction measures before, rising carbon prices means an increase in production and operation costs, which will be more difficult in the future. Currently, affected by the domestic and international economic situation, business operations are facing certain difficulties. At this time, companies improve and update carbon reduction equipment or processes, cost pressure will increase sharply in the short term. For companies that have been actively reducing carbon emissions for a long time, they may benefit from better carbon reduction effects and have greater competitive advantages, which will lead to a stronger situation. At present, many companies such as steel, cement, and electrolytic aluminum are still at a loss. This situation cannot be maintained for a long time. In this context, the inclusion of these three industries in carbon market transactions will also force the industry to accelerate the pace of transformation and upgrading., some backward enterprises will be eliminated.

China Environment News: How can companies in the steel, cement, electrolytic aluminum and other industries respond to the expansion of the carbon market?

Du Tao:First of all, we must do a good job in the basic work. Industries and enterprises need to establish their own carbon emission monitoring, reporting, data systems, and verification systems in accordance with the "Guidelines for Accounting and Reporting of Greenhouse Gas Emissions for Enterprises" formulated by the Ministry of Ecology and Environment to make carbon emission data more accurate and transparent to adapt to Carbon market trading requirements.

Secondly, actively explore and apply advanced carbon reduction technologies. Increase investment in research and development of energy-saving and carbon-reduction technologies, improve energy utilization efficiency and reduce carbon emission intensity through the application of advanced technologies and equipment, and gain advantages in the carbon market with carbon reduction effects. For example, the steel industry promotes efficient and energy-saving smelting technology and equipment through extreme energy efficiency projects, optimizes corporate production processes, improves energy efficiency and reduces carbon emissions. Representative of the Zhanjiang Production Base of China Baowu Iron and Steel Group, we actively explore hydrogen metallurgy technology and build zero-carbon production lines. In addition, companies need to improve their carbon asset management capabilities as soon as possible, rationally plan the use of quotas based on their own carbon emission intensity and output, optimize the allocation of carbon assets by buying and selling carbon emission quotas, and strive to achieve a win-win situation in the carbon market.

China Environment News: From the perspective of the government and industry, how to promote the steel, cement, electrolytic aluminum and other industries to achieve the goal of carbon peak?

Du Tao:The state and industry departments have the most accurate industry data and information, and must actively plan and unify layout to avoid entanglement and low-price competition, promote the healthy development of the industry, and promote the goal of carbon peak in steel, cement, aluminum smelting and other industries.

First, the government and industry departments should strengthen macro-control and resource allocation. Take the steel industry as an example:

For example, macro-control of steel output is carried out. Although my country's carbon emissions per ton of steel have been well controlled, if steel production continues to grow, it will be difficult to reduce the total carbon emissions. The steel industry can reduce crude steel production by improving material utilization efficiency and extending service life, thereby reducing carbon emissions. It is estimated that carbon emissions can be reduced by approximately 21% by improving material efficiency to reduce crude steel demand during the carbon neutrality process in the steel industry.

Another example is to optimize the process structure. There are two main types of steel production processes. One is the long "blast furnace and converter" process using iron ore as the main raw material, and the other is the short process of electric furnace using scrap steel as the main raw material. At present, my country mainly uses long processes, which account for about 90% of crude steel output, while short processes have about 1.5 tons lower carbon emissions per ton of steel than long processes. It is estimated that through process structure adjustment and optimization, carbon emissions can be reduced by about 12%. Of course, adjusting the industry's process structure and expanding the proportion of electric furnace short-process steel output also need to consider resource endowments and optimize resource allocation, such as the allocation and supply capabilities of scrap steel resources, green electricity resources, etc. This year, the "Special Action Plan for Energy Saving and Carbon Reduction in the Steel Industry" issued by the National Development and Reform Commission and other departments has made "increasing the proportion of short-process electric furnace steelmaking" an important measure to promote green and low-carbon development of the steel industry, proposing "by 2025 By the end of the year, the utilization of scrap steel will reach 300 million tons, and the proportion of electric furnace steel output in the total crude steel output will strive to increase to 15%." It can be seen that industry macro-control and structural adjustment are important ways to promote green and low-carbon transformation.

Secondly, it is necessary to popularize and promote advanced energy-saving and carbon-reduction technologies in steel, cement, electrolytic aluminum and other industries. It is estimated that carbon emissions can be reduced by about 23% by promoting and popularizing advanced energy-saving and carbon-reduction technologies in the steel industry.

These measures are the most effective way for the steel industry to reduce carbon dioxide emissions. If they can be implemented in the "double carbon" process and reduce carbon emissions by more than half, it is worth looking forward to.

Promoting the implementation of these emission reduction measures requires the government, industry associations, and enterprises to continuously explore and strengthen cooperation. There are indeed certain difficulties at present, but these tasks must be done step by step. The difficulties are temporary and win-win results will be achieved in the future.