The executive meeting of the State Council deliberated and passed the Interim Regulations on the Administration of Carbon Emission Trading (Draft)

The executive meeting of the State Council held on January 5 deliberated and approved the Interim Regulations on the Administration of Carbon Emission Trading (Draft) (hereinafter referred to as the "Regulations").

As carbon emission trading is a new thing born in the process of exploration, under the policy first and the market first, the development results have been remarkable in recent years, but there are also situations such as the basic legal concepts of the relevant rules are not clear. The industry generally believes that the "Regulations" have a clearer definition of the legal attributes of carbon emission rights, which is not only conducive to the expansion of the national carbon emission trading market, but also conducive to the extension of financial business in the field of green and low-carbon.

The Ministry of Ecology and Environment previously stated that the "Regulations" make unified provisions on the coverage of the carbon emission trading market, the determination of key emitting units, the allocation of allowances, the supervision of carbon emission data quality, the settlement of allowances and the operation of trading, and further improve the system of coordinated supervision to better prevent the risks of market operation, so as to promote the standardized and orderly operation and healthy and sustainable development of the national carbon emission trading market, and provide a strong legal guarantee for the realization of China's "double carbon" goal.

Looking back, in July 2021, the national carbon emission trading market was launched, and the first batch of 2,162 key emitting enterprises in the power generation industry were included, making it the world's largest carbon market covering greenhouse gas emissions. However, with the development of carbon emission trading, some problems have also begun to emerge, such as the lack of legal basis for some market activities, the unclear property or asset attributes of carbon emission rights, and the imperfect relevant punishment and incentive mechanisms.

Wu Qi, the academic general counsel of the Hebei Provincial Carbon Peak and Carbon Neutrality Research Association, told reporters that the issuance of the "Regulations" will unify the policies and standards related to carbon emission rights, further strengthen the supervision of greenhouse gas emission management and carbon emission trading nationwide, and promote the sustainable and standardized development of the national carbon market.

In recent years, the development of carbon finance in China has achieved positive results, but the industry generally believes that the number of participating financial institutions and the scale of application still need to be further expanded, especially for the policy standards of carbon finance need to be further improved, and the product investment and innovative development of carbon finance need to be further improved.

The "Regulations" proposes that "the trading products of the national carbon emission trading market are mainly carbon emission allowances, and other trading products can be added in due course with the approval of the State Council." "It has reserved a rule channel for other trading products to promote the innovative practice of carbon finance.

Yuan Shuai, executive vice president of the Institute for the Promotion of Agriculture, Culture and Tourism Industry, said that to promote the healthy and efficient development of the carbon finance market, promising policies are needed, such as promoting the construction of green finance and transition finance standard systems, and improving incentives and constraints. Financial institutions also need to take the initiative to develop diversified financial instruments and continue to deepen green finance pilots.

For transition finance that provides financing assistance for economic entities to transition to the Sustainable Development Goals, You Yi, director of the Management Committee of Hainan Green Finance Research Institute, told reporters that transition finance plays an important role in promoting enterprises to achieve orderly green and low-carbon transformation, and financial institutions need to innovate diversified financial products and services for different transformation needs, and build a more inclusive innovation environment, such as sustainable development re-linked bonds, transition finance loans based on carbon accounts, etc.

Chuancai Securities Research Report believes that transition finance is expected to become a powerful lever to leverage the low-carbon transformation of energy. Enterprises use financing funds rationally and compliantly, concentrate resources to overcome technical difficulties in transformation, and promote the re-growth of their own benefits in the process of reducing energy consumption. Financial institutions will enrich the financing means of the transition finance market, and rationally deploy diversified transition financial instruments such as transition bonds, transition credits, transition funds, transition insurance, and transition trusts, and will also obtain greater opportunities for sustainable development in the process of transformation and upgrading.