Our reporter Du Lijuan reports from Beijing.
As an important market regulation mechanism for carbon neutrality and peak carbon dioxide emissions (double carbon) goals, carbon pricing and carbon trading have attracted much attention. After preliminary preparations, China’s carbon market was officially launched recently. On the first day of trading, the total transaction volume in the national carbon market reached 4,104,000 tons, with a total transaction volume of 210 million yuan. This scale makes the carbon emission trading market become the largest carbon market in the world once it is launched.
Regarding the results of the first day of trading, Jing Li, Ernst & Young’s partner in climate change and sustainable development of financial services in Greater China and director of sustainable development of financial services in the Asia-Pacific region, believes that there are currently eight pilot institutions for carbon emissions trading in China, but the trading price in the pilot market for carbon emissions trading is low due to insufficient market activity.
In her view, if the follow-up countries introduce institutional arrangements for individual and institutional investors to participate in the carbon market, it is expected to attract more market participants, which will lay the foundation for carbon financial product innovation.
On July 30th, the the Political Bureau of the Communist Party of China (CPC) Central Committee meeting proposed that we should do a good job in peak carbon dioxide emissions and carbon neutrality in an overall and orderly manner, put forward peak carbon dioxide emissions’s action plan before 2030 as soon as possible, adhere to a national chess game, correct the "carbon reduction" by sports, establish first and then break, and resolutely curb the blind development of the "two high" projects.
Policy incentives
On September 22nd, 2020, at the 75th session of the United Nations General Assembly, the Chairman of the Supreme Leader announced that China would strive for peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. After that, "peak carbon dioxide emissions" and "carbon neutrality" became hot topics.
Jing Li told the reporter of China Business News that the realization of the goal of "double carbon" needs financial support first. According to the plan, carbon neutrality will be realized from 2021 to 2060. In these 40 years, according to current estimates, at least 138 trillion yuan will be needed. If the overseas layout of enterprises is counted, the overall capital demand is expected to exceed 200 trillion yuan.
In the interview, she admitted that the support of national policies alone may not be enough for such a large capital demand. The realization of the goal of "double carbon" needs to play the role of financial institutions, among which the development of financial products and tools such as green bonds, green loans, green deposits, green funds, green insurance and carbon finance will help the transformation of the energy industry.
A person from a bond rating company said that with the development of green finance, a number of incentive policies, including tax incentives, have been introduced in various places, with the aim of increasing the scale of green bonds. "At present, several provinces and cities are applying for the green financial reform and innovation pilot zone. Once the application is successful, it is expected to stimulate the enterprises and financial institutions in the pilot zone to develop green finance."
The reporter learned that the State Council has approved the establishment of a green financial reform and innovation pilot zone in Lanzhou New District, Gansu Province, and each pilot zone has issued specific rules according to the overall plan to develop green finance. Up to now, the green financial reform and innovation pilot zone has been expanded to six provinces and nine places, and the six provinces are Zhejiang, Jiangxi, Guangdong, Guizhou, Gansu and Xinjiang.
According to the statistics of China People’s Bank, by the end of 2020, the balance of green loans in six provinces (regions) and nine pilot areas reached 236.83 billion yuan, accounting for 15.1% of the total loan balance; The balance of green bonds was 135 billion yuan, a year-on-year increase of 66%.
After more and more enterprises began to participate in green financial business, some challenges were exposed. According to Ernst & Young’s investigation report, at present, the requirements of information disclosure and green certification of green bonds have not been mandatory, but mainly encouraged, which easily leads to management gaps in actual operation. In addition, institutional investors are generally concerned about whether policy incentives can be increased.
In view of these problems, the "Green Finance Evaluation Scheme for Banking Financial Institutions" issued by the People’s Bank of China in June clearly pointed out that the future green bond evaluation results will be incorporated into the policies and prudent management tools of the People’s Bank of China, such as the rating of financial institutions by the central bank.
According to the above-mentioned rating companies, the regulatory authorities are currently considering setting up a refinancing system to support carbon emission reduction, so as to further stimulate financial institutions to issue preferential interest rate loans to eligible projects in the fields of clean energy, energy conservation and environmental protection, and carbon emission reduction technology.
Zero carbon economy
According to the Paris Agreement, the world will be carbon neutral around 2065-2070. Under the framework of Paris Agreement, governments have reached a consensus on climate change. According to United Nations data, up to now, more than 130 countries and regions around the world have set or considered setting the goal of reducing greenhouse gas emissions to net zero by the middle of this century.
According to market participants, China’s goal of "double carbon" within 30 years is an important symbol of China’s "zero carbon economy". However, compared with the current situation that carbon emissions in most developed countries have reached the peak, the time from carbon peak to carbon neutrality in China is generally short, which makes the realization of double carbon targets face great challenges.
In this context, carbon trading is considered as a market regulation mechanism to achieve the goal of "double carbon". According to the current regulations, China’s carbon trading is unified by the state to formulate the total amount and distribution plan of carbon emission quotas, and the local authorities allocate the prescribed annual carbon emission quotas to emission units.
Carbon emission trading, in short, for units whose actual emissions exceed their quotas, quotas can be purchased through the market, while for low-carbon enterprises, excess carbon emission quotas can be sold every year to obtain additional income.
Since 2011, China has carried out pilot carbon emission trading in Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong and Shenzhen. At present, the turnover of eight major carbon emissions trading pilot institutions in China is still small. At the same time, due to the lack of market activity, the transaction price in the pilot market of carbon emissions trading is low.
In Jing Li’s view, there will be huge room for improvement in the pilot work of China’s carbon emissions trading market in the future. Especially after the national carbon market was officially launched on July 16th, more than 2,000 key emission units of the national power generation industry were brought into the national carbon market, and it is estimated that the annual emission of carbon dioxide will exceed 4 billion tons.
Although transformation and upgrading will bring pains to the industry, Jing Li believes that peak carbon dioxide emissions and carbon neutrality are a systematic project, and related industries need transformation and upgrading. "The overall idea should be to learn from international experience and take into account domestic conditions, and systematically establish and standardize a green tax system." Jing Li said.
She suggested that at present, the country should increase the relevant tax incentives for the development and transformation of low-carbon emissions and related technologies, and at the same time, increase the restrictive collection of manufacturers and users of high-carbon emissions, and achieve the goal of precise concessions and precise restrictions on related industries through the adjustment of tax policies.
(Editor: Meng Qingwei Proofreading: Zhai Jun)