Trading in the national carbon market has commenced
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At 9:15 on July 16, the launch ceremony for trading on the national carbon market was held simultaneously in Beijing, Shanghai, and Wuhan, with the first trades taking place at 9:30. This means that China’s carbon trading has officially moved from a ten-year pilot phase to a nationwide market, marking a milestone in the development of China’s carbon market. Currently, the first transaction has been successfully arranged at the Shanghai Environment and Energy Exchange at a price of 52.78 yuan per ton. A total of 160,000 tons were traded, resulting in a transaction value of 7.9 million yuan. As of now, the latest transaction price is 50 yuan per ton, which is significantly higher than the previous market estimates of 20–40 yuan per ton. As of 9:35, the trading volume was 309,000 tons, with a transaction value of 15.4558 million yuan. In accordance with relevant rules and announcements, the national carbon market adopts a \"dual-city model\", with the trading center located in Shanghai and the carbon quota registration center located in Wuhan. The trading product in the national carbon market is carbon emission allowances, priced per ton of carbon dioxide equivalent. The minimum unit of change for the quantity offered for sale or purchase is 1 ton of carbon dioxide equivalent, while the minimum unit of change for the price is 0.01 RMB. The trading methods include negotiated transfer (listed negotiated transfer and bulk negotiated transfer) and one-way bidding. For listed negotiated transfer, the maximum quantity that can be traded in a single transaction is less than 100,000 tons of carbon dioxide equivalent, with a price fluctuation limit of 10%. Trading hours are from 9:30 to 11:30 in the morning and from 13:00 to 15:00 in the afternoon, from Monday to Friday. At the outset of the national carbon market, there were 2,225 power generation companies as trading participants. Each participant could open only one trading account, but they could apply for multiple operators and the corresponding account access rights as needed for their operations. The development of China’s carbon market began with local pilot projects. According to Li Gao, director of the Department for Addressing Climate Change under the Ministry of Ecology and Environment, local pilot programs for carbon emission trading have been carried out in cities such as Beijing, Tianjin, Shanghai, Chongqing, Hubei, and Guangdong since October 2011. Trading activities within these local pilot programs began in June 2013, and positive progress has been made over the years as a result of these efforts. The pilot markets encompassed nearly 3,000 key emitters in over 20 industries such as electricity, steel, and cement. By June of this year, the total volume of carbon credits traded in these pilot provinces and cities reached 480 million tons of carbon dioxide equivalent, with a transaction value of around 11.4 billion yuan. The compliance rate of key emission entities remained at a high level; both the total amount of carbon emissions and their intensity within the market coverage area decreased, which facilitated enterprises’ efforts to reduce greenhouse gas emissions, enhanced the awareness of low-carbon development among all sectors of society, and accumulated valuable experience for the development of the national carbon market. The national carbon market has chosen the power generation sector as a starting point, for two main reasons: first, the power generation sector burns coal directly, resulting in high levels of carbon dioxide emissions. More than 2,000 key emission sources in the power generation sector across the country, including those with their own power plants, emit over 4 billion tons of carbon dioxide per year. By making the power generation sector one of the first industries to be included in this system, it is possible to fully leverage the positive role of the carbon market in controlling greenhouse gas emissions. Second, the management system in the power generation industry is relatively sound, and the data foundation is good. The accurate and effective acquisition of emission data is a prerequisite for carrying out carbon market transactions. “The national carbon market plays a very important role and holds great significance in achieving carbon peak and carbon neutrality. ”Zhao Yingmin explained that this is reflected in several aspects: first, it promotes high-emission industries under carbon market regulation to achieve greener and lower-carbon structures in their industrial layouts and energy consumption, thereby helping such industries reach their emission peaks ahead of others. Secondly, it aims to send price signals for carbon emission reduction and provide economic incentives to channel funds toward industries and enterprises with high potential for emission cuts, thereby fostering innovation in green and low-carbon technologies. Third, by establishing a national carbon market offset mechanism, it promotes the increase of carbon sinks in forestry, fosters the development of renewable energy, and advocates green and low-carbon patterns of production and consumption. Fourth, by leveraging the national carbon market, it provides investment and financing channels to support the green and low-carbon development and transformation of industries and regions, thereby helping to achieve carbon peak and carbon neutrality. Next, the Ministry of Ecology and Environment will push for the introduction of the Interim Regulations on Carbon Emission Trading, in order to further improve the relevant technical regulations, standards, and management systems. On the basis of a healthy operation of the carbon market in the power generation sector, the scope of this market should be gradually expanded to include more industries with high emissions. The types of transactions and the methods used for trading should be diversified as needed, so as to ensure the stable and effective operation as well as sustainable development of the national carbon market. Source | Observer Network
Entering 2020, global awareness of climate action increased significantly, and public support grew substantially. A special report released by the United Nations’ Intergovernmental Panel on Climate Change (IPCC) emphasizes that countries should strive to keep global warming below 1.5°C and reduce greenhouse gas emissions from all sources; it is urgent to take prompt and strong action on climate change. On February 1, 2021, the \"Administrative Measures for Carbon Emission Trading (Trial)\」drafted by China’s Ministry of Ecology and Environment came into effect, aiming to ensure the implementation of carbon reduction measures through regulatory frameworks and striving to achieve carbon neutrality by 2060. Recently, the Central Economic Work Conference officially listed efforts to achieve carbon peak and carbon neutrality as key tasks for 2021, which indicates that profound changes may occur in areas such as China’s industrial structure, energy structure, investment pattern, and lifestyle. Between 2019 and 2020, various jurisdictions around the world officially set carbon neutrality goals. From the European Union to Fiji, from the United Kingdom to California in the United States, and from New Zealand to Costa Rica, **local** authorities in these jurisdictions are gradually driving the wave of global carbon neutrality initiatives. Dozens of countries and regions have already set climate targets of achieving zero carbon or carbon neutrality. The Net Zero Emissions Tracker, run by the well-known nonprofit organization in the field of climate change, the Energy and Climate Intelligence Unit (ECIU), tracks the progress of various countries around the world; these include 2 countries that have already achieved their goals, 6 countries that have enacted relevant legislation, and others, including the European Union as a whole, as well as 5 other countries, which are in the process of enacting such legislation. In addition, 14 ** (including the EU) have issued policy declaration documents (see Table 1).
The development history of China’s carbon trading market 3.1 Carbon markets in pilot areas Before 2012, China mainly participated in Clean Development Mechanism (CDM) projects; with the arrival of the post-Kyoto era, the country began to develop its carbon trading market. In October 2011, China’s National Development and Reform Commission approved seven provinces and municipalities—Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen—to carry out pilot programs for carbon emission trading, thus marking the beginning of the development of China’s carbon trading market. China’s carbon trading market is primarily based on an allowance market, supplemented by a market for certified voluntary emission reductions. Since the launch of eight pilot carbon markets in China in 2013, related trading activities have grown and developed at an accelerated pace. According to statistics, a total of 2,837 key emission entities, 1,082 non-compliant organizations, and 11,169 individuals are currently participating in the pilot carbon market transactions. As of the end of January 2021, a total of 447 million tons of carbon market allowances had been traded in all 8 regions, resulting in total transaction values of 10.461 billion yuan. Among them, Guangdong and Hubei provinces had the highest cumulative trading volumes and ranked in the top tier ； Shenzhen, Beijing, and Shanghai rank in the second tier in terms of transaction volume ； Tianjin, Chongqing, and Fujian rank in the third tier in terms of cumulative transaction volume. As of the end of January 2021, the Chinese certified voluntary emission reduction market had seen a total volume of nearly 270 million tons in transactions. Shanghai led in terms of transaction volume, with over 110 million tons (accounting for 41%) being traded there ； Guangdong ranks second, with cumulative transactions exceeding 55.75 million tons (accounting for 21%) ； The cumulative transaction volume in Beijing, Shenzhen, Sichuan, Fujian, and Tianjin ranges from 10 million to 30 million tons (accounting for 4% to 10%). 3.2 National Carbon Market On September 22, 2020, China’s leader announced during the general debate of the 75th United Nations General Assembly that China would increase its voluntary emission reduction efforts, adopt more stringent policies and measures to peak carbon dioxide emissions by 2030, and strive to achieve carbon neutrality by 2060. The leader called on all countries to seize the historic opportunities presented by the new wave of technological revolution and industrial transformation in order to promote a green recovery of the world economy after the pandemic and build a strong momentum for sustainable development. Against the backdrop of actively building new types of international relations and a community with a shared future for mankind, industries such as steel, cement, chemicals, electrolytic aluminum, and papermaking – in addition to the power sector – are expected to be included in the national carbon emission trading system during the 14th Five-Year Plan period. According to predictions by the Boston Consulting Group in the United States, from now until 2050, China will need investments in the range of 90 trillion to 100 trillion yuan to achieve its carbon neutrality goals. Such investments will provide a steady driving force for China’s economic growth over the next 5 to 10 years, with an expected annual growth rate of 5% to 6%. It is evident that carbon neutrality is not an economic burden; rather, it will create more opportunities for social and economic growth and transformation. Of course, the achievement of a green transition relies on **guidance and incentives for enterprises to reduce emissions; China’s long-awaited carbon emission trading system has proven to be an effective market-based mechanism for reducing emissions.** After planning and testing, on December 30, 2020, the Ministry of Ecology and Environment of China officially issued the \"Implementation Plan for Setting and Allocating Total National Carbon Emission Trading Quotas for 2019–2020 (Power Generation Sector)\". Under this implementation plan, a total of 2,225 key emission units in the power generation sector were included in the national carbon market during 2019–2020; it is preliminarily estimated that the total annual carbon dioxide emissions from these thermal power plants range from 4 billion to 4.5 billion tons. Next, China’s Ministry of Ecology and Environment will accelerate the development of the national carbon emission rights registration and trading systems, gradually expand the range of industries covered by these markets, diversify the types of assets traded and the trading methods used. This will enable the market mechanism to play an important role in controlling greenhouse gas emissions, promoting innovation in green and low-carbon technologies, and guiding climate-related investment and financing. It is predicted that the national carbon trading market is set to launch in 2021. Based on projections regarding the liquidity of carbon markets in the pilot areas – where 5% of the quotas are brought onto the trading platform – it is estimated that the national carbon market could see transaction volumes of over 200 million tons. If further advancements are made in terms of the types of assets available for trading and the underlying mechanisms, its liquidity is likely to increase further, leaving ample room for growth in transaction volumes.
“A unified national carbon market will create a market scale in the hundreds of billions, estimated Lu Rixin, an analyst specializing in new energy at Orient Securities. Regarding the volume of carbon emission trading, Lu Jixin believes that China’s total annual carbon emissions currently exceed 10 billion tons. Assuming that 30%-40% of emissions will be included in the carbon trading market by 2025, the scale of China’s carbon emission quota trading market will be over 3 billion tons, which is comparable to the total emission levels of the European Union. Regarding the volume of carbon emission trading, Lu Jixin believes that, based on the findings of the \"2020 China Carbon Price Survey\" published jointly by the China Carbon Forum and ICF International Consulting, the carbon price within the national carbon emission trading system is expected to rise steadily to 71 yuan per ton by 2025, with the total market value of the national carbon emission quota trading market reaching 284 billion yuan. Based on the current design parameters, Guorong Securities estimates that the market value of the national carbon market could reach around 150 billion yuan; if the trading volume of derivatives such as carbon futures is taken into account, this figure could rise to around 600 billion yuan. Regarding forward trading of carbon quotas, according to Liu Jie, by the end of 2020, the cumulative trading volume of Shanghai carbon quota forwards had reached 4.33 million tons, with steady growth occurring almost every year. Ji Xiaoyun, a researcher at Green Great Wall Futures, believes that based on the standard that the trading volume of carbon futures in the EU is 30 times that of the spot market, the trading volume of carbon futures in China could reach around 400 billion tons. Based on the current average price of 50 yuan per ton in the pilot carbon markets, the annual trading volume of carbon futures is expected to reach 20 trillion yuan, which is roughly on par with the trading volumes of commodities such as rubber, iron ore, and copper. Currently, 8 regions across the country are carrying out pilot programs for carbon emission trading. As of November 2020, the total volume of allowances traded in these pilot carbon markets amounted to approximately 430 million tons of carbon dioxide equivalent, with total transaction values approaching 10 billion yuan.
Four companies affiliated with Sinopec, including Shengli Oilfield, Maoming Petrochemical, Shanghai Petrochemical, and Zhongtian Hechuang, participated in the carbon trading on the first day; the transaction volume was 250,000 tons, accounting for over 6% of the total trading volume.
On July 21, Sinopec successfully completed the first large-scale negotiated transaction in China’s national carbon market, purchasing 100,000 tons of carbon allowances from China Resources Group. According to data released by the Shanghai Environment and Energy Exchange, this transaction was the first of its kind since the launch of the national carbon market, and it was also the only large-scale negotiated transaction to take place that day. The transfer of carbon emission rights agreements will take place through two methods: listed agreement trading and block agreement trading. Transactions involving amounts of 100,000 tons or less will be conducted via listed agreement trading, while those involving amounts of 100,000 tons or more will be carried out through block agreement trading. Estimates suggest that the carbon emissions of enterprises included in the first batch of entities covered by the carbon market nationwide exceed 4 billion tons, which means that China’s carbon emission trading market will, once it is launched, become the largest carbon market in the world in terms of the scale of greenhouse gas emissions it covers.
Today, the volume of negotiated transactions for carbon emission allowances (CEA) in the national carbon market was 112,000 tons, with a total transaction value of 6,092,830.00 yuan. The opening price was 54.20 yuan per ton, the highest price reached 55.50 yuan per ton, the lowest price was 54.07 yuan per ton, and the closing price was 54.40 yuan per ton – a 2.10% increase compared to the previous day’s closing price. Today, the volume of block trade transactions was 100,000 tons, with a transaction value of 5,292,000.00 yuan. Today, the total trading volume of national carbon emission allowances (CEA) was 212,000 tons, with a total transaction value of 11,384,830.00 yuan. As of today, the total volume of carbon emission allowances (CEA) traded in the national carbon market amounts to 4,608,753 tons, with a total trading value of 237,087,449.25 yuan.