What should be paid attention to in carbon trading?

With the increasing global climate change, how to take effective measures to reduce greenhouse gas emissions is gradually becoming the focus of common attention in the environmental, political and economic fields. According to data released by the International Energy Agency (IEA), China’s greenhouse gas emissions in 2007 were 6.03 billion tons, which exceeded the US’s 5.77 billion tons, making it the world’s largest emitter of greenhouse gases.

Judging from the current situation, China is still a mode of extensive economic development at this stage. The increase in GDP depends on a large amount of energy consumption. At the same time, simply relying on traditional command-and-control methods has been unable to effectively complete domestic emission reduction targets and international emission reduction commitments. We must find low-cost, high-efficiency emission reduction measures, reduce greenhouse gas emissions, accomplish emission reduction targets, and promote the development of a low-carbon economy.

In order to effectively control greenhouse gas emissions, China formally proposed to start trials of carbon emission trading in seven provinces and cities in Shanghai from 2013. Based on the study of the international carbon emission trading mechanism and the status quo of Shanghai's energy consumption and CO2 emissions, we have made suggestions on the design and development strategy of the Shanghai carbon emissions trading mechanism.

We believe that 2013-2015 should be used as the commissioning phase of the Shanghai carbon emissions trading mechanism. It will enter the formal stage from 2016 and it is recommended that every five years thereafter be an implementation phase.

China's background and current status in Shanghai China, as a developing country, participates in international carbon emissions trading primarily through the CDM (Clean Development Mechanism). At present, China has become the largest seller in the global CDM market. Both the number of successfully registered CDM projects and the number of CERs awarded have ranked first in the world. Although China's CDM has developed rapidly, there are also many problems. First, the registration success rate and issuance rate of CDM projects in China are low. Secondly, China's CDM projects are of a single type. Both successful and registered projects are mainly focused on new and renewable energy, energy conservation, and energy efficiency. Third, the CDM market is the buyer's market. China, as a sole seller of the CDM, is at the lowest end of the international carbon trading chain during the transaction process. It lacks the right to speak and pricing, and foreign buyers often purchase Chinese CERs at a low price. It is then sold to demanders in the international secondary market at a price several times higher than the original price. Therefore, it is imperative for China to develop its own carbon emissions trading market.

On October 29, 2011, the National Development and Reform Commission issued the “Notice of the National Development and Reform Commission’s General Office on Launching the Pilot Work of Carbon Emissions Trading” and formally approved Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen. The city launched a carbon emissions trading pilot and plans to launch a trial of regional carbon emissions trading rights by 2013. From 2015, it will launch carbon emissions trading nationwide and establish a national carbon trading market.

The study of Shanghai's carbon emissions trading mechanism needs to be based on Shanghai's greenhouse gas emissions. Understanding the actual situation of Shanghai's carbon emissions can provide more reasonable and effective suggestions for the design of Shanghai's carbon emissions trading mechanism.

The greenhouse gas emissions from Shanghai are mainly carbon dioxide, methane, and nitrous oxide, of which carbon dioxide accounts for more than 95%. From the perspective of emissions, the first CO2 emission in Shanghai in 2004-2008 was the secondary industry, followed by the tertiary industry, domestic consumption and primary industry. Therefore, the secondary and tertiary industries that affect the carbon emissions of Shanghai's terminal energy consumption are mainly. Among them, the growth rate of the tertiary industry is very significant.

According to the industry classification, the secondary industry includes the industrial and construction industries, of which the industry can be further divided into 34 major categories. The CO2 emissions from the secondary industry in Shanghai are mainly from the industry and account for more than 95% of the total emissions of the secondary industry. The total emission of CO2 from the top ten industrial sectors accounts for about 50% of the city's total emissions. In the tertiary industry, CO2 emissions from transportation, warehousing and postal services dominate, with a share of over 60%.

Specifically, the ferrous metal smelting and pressure processing industry, transportation, warehousing and postal services, petroleum processing, coking and nuclear fuel processing, chemical raw materials and chemical manufacturing are the top four industries with much higher CO2 emissions than other industries. . Among them, the growth of transportation, warehousing and postal industry is very rapid, with an average annual growth of 3.88 million tons, with an average annual growth rate of 9.84%.

The CO2 emissions of the top ten industrial sectors account for about 50% of the total CO2 emissions in Shanghai. Together with the construction and transportation industries, the total CO2 emissions account for about 70% of the total CO2 emissions from Shanghai's energy consumption. As an energy secondary processing industry, the power industry is an energy-intensive industry, although its own consumption of CO2 emissions is fifth in the industrial sector. However, the amount of CO2 emitted during electricity production exceeds 60 million tons, accounting for about 30% of the total CO2 emissions from energy consumption in Shanghai.

The coverage of the trading carbon and the subject’s choice of carbon emissions trading mechanism refers to the trading gas and the trading entity. The Kyoto Protocol specifies six types of greenhouse gases: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and hexafluoride*.

The purpose of each country or region to implement carbon emissions trading mechanisms is different. Some are aimed at fulfilling emission reduction commitments from outside, some aim at reducing greenhouse gas emissions, and some are aimed at introducing carbon emission price mechanisms to influence market behavior. The purpose of different mechanisms will affect The choice of trading gas.

As a pilot city for carbon trading, Shanghai has to consider the operation of the system as the primary consideration when selecting gas. In determining the trading gas, consideration should also be given to realistic conditions such as the emission and composition of greenhouse gases in Shanghai and the availability of data.

Research shows that the major greenhouse gas emissions in Shanghai are carbon dioxide, methane, and nitrous oxide, which are dominated by carbon dioxide. Therefore, at the initial stage of the implementation of carbon emissions trading in Shanghai, CO2 can be selected as the transaction gas, and the scope of transaction gas can be selectively expanded after the mechanism is operationally stable, such as methane and other five kinds of greenhouse gases.

The subject of trading refers to the industry or company that is included in the trading system. The scope of the trading entity of the existing carbon emission trading mechanism is inconclusive, and the bigger the better, the smaller the better. In reality, even full coverage does not guarantee the most effective emission reduction.

In some industries, emissions are very small compared to total emissions. If these industries are included in the trading system, the benefits of emission reduction may be much lower than the increased management costs. For example, Shanghai's agricultural emissions account for a very small proportion of total emissions and show a declining trend. Coupled with the difficulty of measuring greenhouse gas emissions from agriculture, the agricultural sector should not join the Shanghai carbon emissions trading mechanism.

The choice of trading entities in Shanghai's carbon emissions trading mechanism should adhere to the principle of focusing on large and small. 50% of Shanghai's CO2 emissions are concentrated in the top ten industrial sectors, and construction and transportation are also major CO2 emitters. The above industries are the scope of choice for the trading entities of the Shanghai carbon emissions trading mechanism. At the same time, key energy-using enterprises with an annual energy consumption of 5,000 tons or more of standard coal in Shanghai have relatively good statistical data, which can be used as a barrier to entry for companies incorporated into the trading system. They not only have a sound data base, but also exclude small emissions. Sources increase management costs.

Therefore, in the trial operation stage, companies with an annual energy consumption of 5,000 tons or more of standard coal in the top ten industrial sectors can be selected as the main trading entities. Compared with the industrial sector, the construction industry and transportation industry are more complex to implement carbon trading, especially in the transportation industry. Therefore, they are not included in the transaction system at the trial operation stage. After accumulating sufficient experience, they are gradually included in the system.

To the formal operation stage, the total amount of emissions from enterprises that are guaranteed to be included in the transaction range accounts for more than 50% of the total carbon dioxide emissions in Shanghai. As an energy-intensive industry, the power industry emits CO2 that accounts for about 30% of Shanghai's total emissions and should be the focus of the transaction.

Rational design of the initial distribution of carbon emission rights The initial allocation of carbon emission rights can be divided into three modes: free, pricing, and auction. The first and second phases of the EU mainly focus on free distribution under the historical emission principle. The third phase will adopt the principle of baseline, and will continue to increase the proportion of auctions and gradually replace free distribution.

In addition to the auction, whether it is free or fixed sale, there are certain distribution principles. At present, there are two main distribution principles: the principle of the grandfather and the principle of the baseline. The principle of the grandfather system generally uses historical emissions multiplied by a certain proportion of emission reduction, while the principle of the baseline is mainly the amount of quota allocated by the manager to establish the benchmark emission rate and then multiplied by the company’s economic activity index (output value or input, etc.). .

From the perspective of property rights, the initial allocation of carbon emission rights is the distribution of economic benefits. If free distribution is adopted, there will be unfairness for industries and enterprises that have not been allocated. From the perspective of the environment, the carbon emission right is an environmental resource. The free distribution will cause the loss of environmental resources, and it will not be able to motivate enterprises to reduce their emissions. Therefore, paid distribution is a more reasonable choice.

The auction is the most suitable initial allocation method in theory. Although many of the existing carbon emission trading mechanisms did not choose auction as the main distribution method at the beginning, they all indicated that they would gradually introduce the auction mechanism as the main method of distribution.

The commissioning phase of the Shanghai carbon emissions trading mechanism can be priced for sale, and 5% of the total amount is reserved for auction. After entering the formal stage, gradually increase the proportion of auction until the 100% auction. Because the development of the benchmark rate requires detailed emission data as a support, while Shanghai's current situation is obviously unable to meet the requirements for establishing a baseline, the grandfathering principle can be used as a transition during the trial operation stage. After the data has been refined, the industry benchmarks and baseline principles will be adopted.

When determining the carbon emission quota prices for various industries and industries, the industries, technologies, and products that encourage development can be given preferential treatment and support. The industries, technologies, and products that restrict and prohibit development should increase their requirements and promote serious pollution and energy consumption. Overkill of higher industries.

The use of paid distribution will increase the production cost of enterprises, may reduce the competitiveness of local enterprises, and affect economic development. Enterprises that affect competitiveness should be given price subsidies, and the impact on the competitiveness of enterprises should be divided according to their trade strength. The initial price subsidy requirements are greater to help companies adapt to the implementation of the new mechanism, and then can gradually reduce the intensity of subsidies according to the actual situation.

What management departments should do In order to ensure the effective operation of Shanghai's carbon emissions trading mechanism, a comprehensive supervision mechanism should be established. The designated management department should be responsible for the development of regulations for monitoring, verification, and reporting. Each emission entity shall establish a monitoring plan, including the specific technological conditions, monitoring methods and frequency of the emission facilities, and be approved by the management department.

Monitoring is done by the emission entity itself, but before being reported to the management department, it is subject to verification by an independent third party and submitted to the management department for reporting as a basis for subsequent settlement. Third-party independent agencies must carry out qualification accreditation. The verification agency shall submit the application, the management department shall conduct the audit, and the audited agency shall issue the qualification certificate. And regular sampling of third-party agencies that have obtained qualifications shall be disqualified from random inspections.

In the existing carbon emissions trading mechanism, borrowing is not allowed, but many mechanisms allow storage. For Shanghai's carbon emissions trading mechanism, it is recommended that quotas during the trial run phase are not allowed to be stored until the next stage, so as not to bring the irrationality of the trial operation phase into the formal stage. After entering the formal stage, it is recommended to allow the storage of quotas, which can promote the stable operation of the mechanism.

The existing carbon emission trading mechanisms have all stipulated strict punitive measures. In addition to stipulating excessive fines, many mechanisms require that the main body who has not completed the emission reduction targets to make up for them in the second year, and the degree of remedy varies. The purpose of doing so is to avoid companies from evading responsibility and affecting the goal of total control.

At the same time, before the specified time limit, the emission subject must balance the certified carbon dioxide emissions of the year with their own emission rights, and write off after the settlement. Excess emission owners can purchase insufficient emission rights in the market or they will be punished.

The determination of the fine for the carbon emission trading mechanism in Shanghai should ensure that the amount of fines is higher than the cost of purchasing emission rights in the market. At the same time, it should also stipulate that the emission reductions that have not been completed in the previous year should be added to the emission reduction targets for the second year. The trial operation phase can adopt the EU approach and the emission reduction can be accomplished in the same amount.

In addition, Shanghai has established the Shanghai Environment and Energy Exchange in 2008, and an exchange can establish an online trading platform for carbon emissions trading. Each trading entity opens an electronic account at the Central Exchange, and the issuance, holding, settlement, transaction and cancellation of quotas are completed through this account. The management department issues the quotas for each emission entity to the electronic account, and the carbon emissions reported by the emission entities are also recorded in the electronic account for final settlement. The transactions between emissions entities are also recorded in electronic accounts. After the end of each phase, the quotas and emissions in the electronic accounts of the emission entities are settled and the used quotas are written off.

In addition to providing electronic account services, the online platform also pays attention to the information release platform to timely update the transaction status between the emissions entities, including transaction volume, transaction price, etc., to ensure the openness and transparency of information, not only the transaction subject, but also the non-transaction subject can view the transaction information. . At the same time, the online platform can also implement online auction functions.