The important institutional innovation of "dual carbon" has been launched, and enterprises have reduced emissions to achieve low-cost payment and compliance

More than three years after the "dual carbon" goal was proposed, China's carbon trading system has gradually improved. As an important institutional innovation for the goal of carbon peak and carbon neutrality, the national voluntary greenhouse gas emission reduction trading market has recently been launched, which mainly controls and reduces greenhouse gas emissions through market mechanisms, and its launch will help achieve the "double carbon" goal.

Statistics show that the total trading volume of the national greenhouse gas voluntary emission reduction trading market on the first day of launch was about 375,000 tons, and the total turnover was about 23.84 million yuan.

Shi Weiwei, general manager of Datang Carbon Assets Co., Ltd., said in an interview with reporters that due to the carbon emission control enterprises included in the carbon emission trading system in China, there are carbon emission compliance requirements, and the launch of the national greenhouse gas voluntary emission reduction trading market, CCER (certified voluntary emission reduction) can be used as an offset mechanism to participate in the carbon market, which can provide more options for the performance and settlement of emission control enterprises.

"At present, there are two trading products in the national carbon market, one is carbon quotas, the other is CCER, for emission control enterprises, after the launch of the greenhouse gas voluntary emission reduction trading market, enterprises can choose to buy CCER to perform, because the price of CCER is generally lower than the quota, so the use of CCER can not only reduce costs, but also guide and encourage the whole society to reduce emissions. Shi Weiwei said.

Optimize the means to reduce emissions

With the proposal of the "dual carbon" goal, all sectors of society have paid great attention to the launch of the national greenhouse gas voluntary emission reduction trading market platform.

In July 2023, the Ministry of Ecology and Environment (MEE) formulated the Administrative Measures for Voluntary Greenhouse Gas Emission Reduction Trading (Trial) (hereinafter referred to as the "Administrative Measures"), and three months later, the "Administrative Measures" were officially released.

On January 22, 2024, three months after the review and approval of the Administrative Measures, the national voluntary greenhouse gas emission reduction trading market was officially launched. Xia Yingxian, director of the Department of Climate Change at the Ministry of Ecology and Environment, said that the launch of the voluntary emission reduction trading market is conducive to supporting the development of forestry carbon sinks, renewable energy, methane emission reduction, energy conservation and efficiency improvement projects, which can encourage a wider range of industries and enterprises to participate in greenhouse gas emission reduction actions.

At present, there are two main types of carbon trading products in the market: one is carbon allowance, which is the carbon emission allowance allocated by the government to key emitting enterprises within a specified period, that is, carbon emission rights, and the other is CCER, which follows the principle of voluntary, and enterprises can freely choose whether to buy it.

Shi Weiwei introduced that in the carbon emission trading market, if the actual carbon emissions of the emission control enterprises are lower than the total amount of allowances allocated by the government, the surplus allowances can be sold to the outside world, which can obtain the corresponding income;

From the perspective of compliance, after the voluntary emission reduction market is launched, enterprises can use CCER to offset the settlement of annual carbon emission allowances, which will help guide emission control enterprises to choose the most cost-effective carbon reduction means.

According to the Measures for the Administration of Carbon Emission Trading (for Trial Implementation), key emitting entities can use certified voluntary emission reductions to offset the payment of carbon allowances every year, and the offset ratio shall not exceed 5% of the carbon allowances to be paid. "Compared with the price of carbon allowances, CCER has certain advantages in price, so key emitting enterprises choose to purchase CCER to achieve low-cost settlement and compliance. Shi Weiwei said.

In accordance with the policy requirements, the government encourages everyone to voluntarily develop and implement emission reduction projects in accordance with the methods prescribed by the state, promote the development of renewable energy, forestry carbon sinks, methane emission reduction, energy conservation and efficiency improvement, etc., so as to reduce greenhouse gas emissions and increase carbon sinks.

It is reported that the current carbon market allowance trading is mostly bulk agreements, with a total transaction volume of 370 million yuan, more than 80% of the total turnover, mainly because the national carbon emission trading market only has the participation of power industry emission control enterprises, so the counterparties are power industry emission control enterprises.

In this regard, PwC China ESG Sustainability Market Leader Ni Qing said that the launch of the voluntary emission reduction trading market will include more participants, including non-emission control enterprises, intermediaries and even individuals, which will further enhance the activity of the domestic carbon market and boost public confidence in the domestic carbon market.

Transform your business

According to the Administrative Measures, legal persons, other organizations and natural persons that meet the relevant national regulations can participate in voluntary emission reduction trading. Therefore, the market entities involved in CCER transactions can be enterprises, institutions, financial institutions, etc., as well as natural persons.

This means that after the launch of the voluntary emission reduction trading market, all kinds of social entities can independently and voluntarily develop greenhouse gas emission reduction projects in accordance with the requirements of relevant regulations, and the emission reduction effects of the projects can be sold in the market to obtain the corresponding emission reduction contribution benefits after the project emission reduction effect has been quantitatively verified and registered by scientific methods.

"The resumption of voluntary emission reduction trading can quantify the environmental benefits of emission reduction projects and increase the motivation of enterprises to actively reduce emissions, which will attract more enterprises to participate in carbon trading through the implementation of carbon emission reduction projects, and greatly enhance the activity of the carbon market. Ni Qing said.

Specifically, the owners of voluntary emission reduction projects can obtain a certain amount of income through the sale of CCER, while high-emitting enterprises can use CCER to fulfill carbon emission reduction obligations, and the price of CCER has certain advantages compared with the price of allowances. In addition, enterprises and institutions can purchase CCER to offset carbon emissions, achieve carbon neutrality in products and major activities, and fulfill low-carbon commitments.

Shi Weiwei said, for example, taking solar thermal and offshore wind power as an example, after the "double carbon" goal was proposed, the policy clearly required to support the development of renewable energy, which is a necessary way for China's industrial adjustment and energy structure adjustment, in this context, the launch of the voluntary emission reduction trading market provides more choices for enterprises to reduce emissions, and CCER has realized the transfer of funds to low-carbon and zero-carbon technologies to a certain extent, which coincides with the direction of policy encouragement and support, so in the long run, it has an important guiding role in the realization of "double carbon".

However, the construction and improvement of the CCER market is also a gradual process.

Ni Qing said that from the perspective of the supply side, since there is a certain period of CCER registration and issuance, the supply of CCER will be relatively limited in the short term, and in the future, with the release of more methodologies, the supply of CCER will be more sufficient with the increase of emission reduction projects. "At the same time, as China's voluntary emission reduction trading continues to mature, diversified and innovative carbon financial derivatives such as CCER forward trading are expected to appear in the market in the future. Ni Qing revealed.