How can the carbon market reduce the overall cost of emission reduction in the power sector by about 35 billion yuan in the two compliance cycles?
The 2024 government work report states that it is necessary to "expand the coverage of the national carbon market sector".
Recently, the carbon accounting and carbon verification guidelines for the electrolytic aluminum and cement industries have been released one after another, which has become another positive signal for the expansion of the national carbon market.
Zhao Yingmin, Vice Minister of the Ministry of Ecology and Environment, pointed out at the State Council's regular policy briefing held by the Information Office of the State Council that with the continuous expansion of the scope of industries covered by the carbon emission trading market, the optimal allocation of carbon emission resources among different industries across the country will ultimately minimize the total cost of emission reduction in the country.
The reporter noticed that at the briefing, Vice Minister Zhao Yingmin specifically mentioned a data, "it is estimated that the overall emission reduction cost of the national power industry has been reduced by about 35 billion yuan in these two compliance cycles", so how does the carbon market reduce the overall emission reduction cost of the industry and the whole society?
How can the carbon market help companies reduce the cost of reducing emissions?
"The carbon market is a market mechanism, and the essence is to achieve the same set emission reduction target under the condition that the whole society has the best carbon emission reduction cost (including management cost, economic cost, etc.). The carbon market allows companies to match their actual carbon emissions with carbon credits as much as possible. Enterprises undertaking emission reduction tasks can adjust their emission reduction tasks through currency exchange (carbon emission trading), so as to achieve the purpose of reducing the cost of enterprise emission reduction. Zhang Jingjie, deputy director of the Planning and Development Department of the China Electricity Council, told this reporter.
The cost of reducing emissions varies between different industries and different companies in the same industry. The design of the carbon market can provide an additional channel for enterprises with different emission reduction costs. In other words, companies with higher emission reduction costs can do so by purchasing allowances, and those with lower emission reduction costs can obtain additional emission reduction funds through the carbon market.
"Differences in the service time of power plant equipment, the type of unit and the level of technology will affect the cost and effect of unit emission reduction. In particular, if there is a large difference between the types of units in two power plants, the difference in emission reduction costs between them will be relatively large. Shi Weiwei, executive director and general manager of Datang Carbon Assets Co., Ltd., told this reporter.
For example, for example, company A needs to spend 150 yuan to reduce one ton of carbon dioxide through technological improvement, and company B only needs to spend 50 yuan to reduce one ton of carbon dioxide. Assuming that the emission reduction target of these two companies is to reduce each of them by 1 ton of carbon dioxide per year, if market means are not used, the two companies will spend a total of 200 yuan to reduce two tons of carbon emissions. Now with the carbon market as a policy tool, it gives enterprises more choices, assuming that the price of a ton of carbon allowance is 80 yuan, for enterprise B, the original emission reduction of a ton of carbon to complete the benchmark target, now it finds that an extra ton of carbon can be sold for 80 yuan, not only to cover their own carbon reduction costs, but also to earn 30 yuan, B enterprises are more motivated to reduce emissions, more willing to reduce more carbon. For company A, the cost of reducing one ton of carbon is 150 yuan, while the cost of purchasing one ton of carbon allowance for company B is only 80 yuan, and the cost of carbon reduction is directly reduced by 70 yuan.
From the perspective of total social spending, in the carbon market, the total cost of reducing two tons of carbon is 100 yuan (the cost of A is 80 yuan for purchasing one ton of allowance, and the cost of B is 2 * 50-80 = 20 yuan), which is directly reduced by 50% compared with the original cost of 200 yuan.
Shi Weiwei said that the above examples illustrate the logic of reducing carbon reduction costs, that is, enterprises with low technical level and management capabilities spend money to let other enterprises with lower emission reduction costs reduce carbon more, so as to achieve the overall reduction of carbon reduction costs of the two enterprises, which is the logic of reducing the cost of emission reduction for the entire industry under the influence of the carbon market. The overall emission reduction cost of the national power industry by about 35 billion yuan is based on this logic and uses a set of scientific calculation methods.
Will cost reduction make some companies lack the incentive to reduce emissions?
From the above examples, it can be seen that in fact, enterprise A, which has a higher cost of emission reduction, needs to upgrade its technology to reduce carbon emissions, and it may be relatively backward in productivity. However, after company A saves the cost of reducing emissions by purchasing carbon allowances in the carbon market, will it lack the motivation to reduce emissions?
"At this stage, the carbon market is still in its infancy, although the cost of emission reduction of 150 yuan A enterprise has not really reduced emissions, but for the whole society, it is indeed a reduction of two tons of carbon, which is equivalent to the company spending money to reduce the easier to reduce the emission of enterprises to reduce an extra ton of carbon, which is a big account. Shi Weiwei said: "In the future, carbon emission quotas will be tightened more and more, and at the same time, the price may be higher, which will force enterprises with higher emission reduction costs to actively reduce emissions." ”
The Interim Regulations on the Administration of Carbon Emission Trading (hereinafter referred to as the "Regulations"), which will come into force on May 1 this year, stipulate that "carbon emission allowances shall be allocated free of charge, and a combination of free and paid allocation methods shall be gradually implemented according to the relevant national requirements".
"At present, China's carbon emission allowance allocation method is free of charge. The timely introduction of paid allocation and the gradual increase of the proportion of paid distribution are conducive to controlling the total amount of carbon emissions and making the carbon price more truly reflect the cost of carbon emission reduction. Shi Weiwei said.
"After the introduction of a paid mechanism for the allocation of carbon emission allowances, it will definitely increase some of the burden on enterprises. However, the original intention of the carbon market is to reduce emissions, and if it has been allocated for free, many companies may not be aware of the pressure to reduce emissions, and in the end, the role of emission reduction through the carbon market itself may not be so direct and obvious. A person in charge of a coal-fired power company told this reporter that paid allocation is not only conducive to enterprises to take the initiative to reduce emissions through research and development and application of new technologies, elimination of backward productivity, etc., thereby promoting the green transformation and upgrading of enterprises, but also facilitating the discovery of carbon prices. ”
What is the effect of emission reductions for power companies in the two compliance cycles?
"After two years of operation and development, the national carbon market has effectively promoted the adjustment of the energy structure and prompted thermal power units to further improve the power generation efficiency. From 2018 to 2022, carbon dioxide emissions per unit of thermal power generation will be reduced by 2.0%. Zhang Jingjie said.
"There are a lot of measures to reduce emissions from coal-fired power companies. The person in charge of the above-mentioned coal-fired power enterprises told this reporter that for example, shut down small-capacity units, promote large-capacity units, promote cogeneration, adjust the power supply structure, accelerate the development of clean energy and renewable energy, improve the quality of coal, improve the efficiency of boiler combustion, strengthen the comprehensive utilization of ash and slag, improve the efficiency of steam turbines, and reasonably select the pumping pressure of steam turbines. Adopt frequency conversion speed regulation technology, achieve the purpose of energy conservation and emission reduction through small index competition, actively promote technological innovation for carbon capture, and establish an evaluation system for economic indicators of units.
For example, Huaneng Qinbei Power Plant invested 127 million yuan to complete the transformation of all components of the turbine flow part of the generator set, the design and transformation of the high-pressure main steam valve and other key technical transformations, after the transformation, the power plant can save 65,000 tons of standard coal and reduce carbon dioxide emissions by 170,000 tons per year, and the environmental protection indicators rank at the leading level of domestic units of the same capacity.
Beijing Jingneng Electric Power Co., Ltd. has created the cross-generation technology of lignite units, that is, zero water intake for power generation, ultra-low emission of flue gas pollutants, and ultra-supercritical complete sets of equipment for lignite air-cooled units to achieve cross-generational upgrades.
Through energy-saving and carbon-reduction transformation, coal-fired power companies have become more active in participating in the national carbon market since the opening of the national carbon market.
It is understood that compared with the first compliance cycle, the second compliance cycle, the carbon market activity has been significantly improved. By the end of 2023, the cumulative trading volume of the national carbon emission trading market reached 440 million tons, with a turnover of about 24.9 billion yuan. The second compliance cycle saw a 19% increase in volume and an 89% increase in turnover over the first one. In addition, the enthusiasm of enterprises participating in transactions in the second compliance cycle has increased significantly, accounting for 82% of the total number of enterprises participating in the transaction, an increase of nearly 50% compared with the first compliance cycle.
There is reason to believe that with the continuous expansion of the scope of industries covered by the carbon emission trading market, the optimal allocation of carbon emission resources among different industries across the country will ultimately minimize the total cost of emission reduction in the country.
