The carbon market still needs to expand its capacity and strengthen the system

Tan Qilu

Emissions trading is a fundamental and key policy tool to promote cost-effective and low-cost greenhouse gas emission reductions. China launched online trading of the national carbon market in July 2021, and the carbon market officially entered the stage of full rollout from a regional pilot. As of July 19 this year, the cumulative trading volume of carbon emission allowances of the first 2,162 power generation enterprises reached 240 million tons, with a cumulative transaction volume of more than 11 billion yuan.

Since its second year of operation, the national carbon market has been healthy, stable and orderly, the design and operability of institutional rules have been comprehensively improved, the carbon pricing function has initially taken shape, the role of guiding enterprises to reduce greenhouse gases and accelerate the green and low-carbon transformation has gradually emerged, and inter-provincial trading has also promoted the coordinated development of the regional economy to a certain extent, basically achieving the expected construction goals. However, the national carbon market is still in its infancy, and there are obvious shortcomings, mainly including: the trading entity is only the power generation enterprises with emission control, which is too single and homogeneous; Trading varieties are almost all spot, and long-term varieties are still blank; The "tidal effect" driven by compliance is obvious, and more than 50% of the trading volume and turnover are concentrated near the performance period, and the liquidity is low; In the absence of financial institutions, it is difficult to form a reasonable and effective carbon pricing mechanism; Wait a minute.

In the future, we should further strengthen the supporting role of the national carbon market in achieving the "dual carbon" goal and promoting high-quality economic development. In terms of pace, we should reasonably grasp loose and tight, fast and slow, and gradually implement various policies, leaving enough room for policy adjustment. In terms of methodology, it is necessary to emphasize the systematic concept of overall planning and coordination, and strengthen the connection and cooperation between the national carbon market and local carbon market pilots, carbon market related policies and other pollution and carbon reduction policies. In terms of measures, we should focus on solving outstanding problems such as trading entities, varieties, and methods, and continuously improve them in the direction of mature markets.

First, accelerate market expansion. In terms of industry expansion, the Ministry of Ecology and Environment has carried out special research work, and the conditions are basically ripe, and it should accelerate the formulation of quota allocation plans for other industries on the basis of the accounting, submission and verification of enterprise carbon emission data accumulated for a long time in the early stage, and in accordance with the principle of "mature one approval and release", the "14th Five-Year Plan" period will be included in the petrochemical, steel, nonferrous metals, papermaking, chemical, building materials and other other high-energy-consuming industries. In terms of the expansion of entities, improve the access conditions, appropriately lower the threshold, and enable more institutions and individuals to participate in the national carbon market. Encourage financial institutions to participate in them, and give priority to some institutions with good credit qualifications and strict supervision to participate in carbon quota and carbon credit trading.

The second is to enrich the variety of means. The carbon market is a typical warrant market with strong financial attributes, and it is necessary to further enrich the trading varieties that can reflect the conversion functions of credit, maturity, liquidity, etc., and improve the market price discovery function. Encourage financial institutions to meet the multi-dimensional financial needs of emission control enterprises, innovate and develop carbon options, carbon loans, carbon funds, carbon insurance and other products, and promote trading institutions to improve carbon financial derivatives and related rules. In addition, this year's Certified Voluntary Emission Reduction (CCER) project has a clear signal to be used as a voluntary tool to further explore its complementary role to the mandatory carbon market.

The third is to improve institutional guarantees. With the continuous expansion of the national carbon market and the gradual diversification of trading methods, the construction of supporting institutions and mechanisms is also facing higher requirements. With the imminent release of the Interim Regulations on the Administration of Carbon Emissions Trading, it is necessary to closely combine the new principles and requirements therein, speed up the revision or promulgation of relevant systems and regulations such as statistical accounting, verification and supervision, and transaction disclosure, and focus on improving the technical specifications, management measures and implementation rules and other documents and provisions to promote the orderly development of the carbon finance market. In addition, plans or plans covering a longer period of time should be introduced in a timely manner to fully reflect the trend of changes in core indicators such as the total amount of carbon allowances and benchmark values, so as to give the market clear expectations.

The fourth is to coordinate the whole country and the localities. At the current stage of coexistence between the national carbon market and the local carbon market, it is necessary to reflect the differences between the two in terms of industries and entities, avoid duplication, and open up trading channels between the two. It is necessary to continue to give play to the role of local pilots as a pilot and carry out exploration and practice earlier than the whole country in terms of free allocation, moderate tight control, paid allocation of quotas, and transformation to a cap-based carbon market.