Favorable policy escort The carbon financial market is expected to usher in rapid development

The Ministry of Ecology and Environment recently reviewed and adopted in principle the Administrative Measures for Voluntary Greenhouse Gas Emission Reduction Trading (Trial), which has been interpreted by the industry as a key step for CCER restart. In the context of increasing carbon market activity, this year, with the landing of national green exchanges, new securities firms gaining access to carbon trading by the CSRC, and expanding the scope of carbon emission support tools, the carbon finance market is expected to usher in a period of opportunity for rapid development. According to the Beijing Green Exchange, with the deep financialization of China's carbon market in the future, the transaction volume is expected to exceed 1 trillion yuan.

CCER is a carbon offset mechanism, in which emission control enterprises purchase certified amounts that can be used to offset their own carbon emissions from enterprises that implement "carbon offsetting" activities. China's CCER market was launched in 2012, and the project application was suspended in March 2017, more than six years ago. However, in August this year, the national voluntary greenhouse gas emission reduction trading system quietly launched the account opening function, achieving one-to-one interconnection with the new national voluntary greenhouse gas emission reduction registration system, and began to accept account opening applications from market participants.

Multiple signals indicate that CCER is not far off to restart trading. Industry insiders generally believe that the restart of CCER will trigger a huge chain reaction, which is expected to drive the activity and participation of carbon market trading.

Ni Qing, PwC China ESG Sustainability Market Leader, told reporters that the CCER restart will help support leading companies to explore and practice a more low-carbon development approach, which will not only help projects that meet the standards with carbon emission reduction effects obtain additional financial support, but also have an impact on the short-, medium- and long-term carbon emission reduction strategy deployment of enterprises. In the long run, the restart of CCER will make the participants of the carbon trading market more diversified, and can better promote the optimal carbon emission reduction cost of the whole society, which will play a positive role in promoting the carbon trading market.

The restart of CCER will also provide more financial institutions with the opportunity to participate in the construction of the national carbon market. How big is the impact of carbon finance on the carbon trading market?

The current industry consensus is that under the background of the gradual opening up of domestic carbon trading, the launch of carbon financial products directly determines the liquidity and trading scale of the carbon trading market. The development of the carbon finance market is highly dependent on the intensity of carbon emission control and the maturity of the spot trading market for carbon emission rights.

At the beginning of this year, the Beijing Green Exchange officially settled in the sub-center of Beijing. As a national green exchange, it will serve as a national greenhouse gas voluntary emission reduction trading center in the future, as well as the infrastructure of the global green finance and sustainable finance center, providing services for more emitting enterprises or entities.

The "circle of friends" of carbon emissions trading and the range of carbon emission reduction support tools have also ushered in signs of expansion. Since the beginning of this year, 6 new securities firms have obtained the "No Objection Letter" issued by the China Securities Regulatory Commission to participate in carbon emission allowance trading, and 3 banks, Bank of Beijing, Beijing Rural Commercial Bank and Beijing Zhongguancun Bank, have been included in the scope of carbon emission allowance support tools in 2023.

Mei Dewen, vice chairman of the Beijing Green Exchange, predicted that if the scale of the EU carbon market is compared with the scale of the EU carbon market, after the deepening financialization of China's carbon market in the future, with its 7 billion to 8 billion tons of quotas, the annual trading volume may exceed 10 billion tons, and the transaction volume will exceed 1 trillion yuan.

"Carbon finance and carbon trading are interdependent and mutually reinforcing. Carbon trading is the premise and foundation for the development of carbon finance, and only after the carbon trading market develops to a certain scale, has a certain qualified entity and a healthy risk management and control mechanism, can the carbon financial market develop in an orderly manner. Carbon finance is a booster for the development of carbon trading, and the development of carbon trading is inseparable from the support of carbon finance, and emitting enterprises use the financing function to promote the application of carbon reduction technology through the carbon finance market to achieve the purpose of carbon trading to control the total amount of emissions. Ye Yanfei, inspector of the State Financial Regulatory Administration, believes that in the process of developing carbon finance and expanding the carbon market, it is necessary to start from three aspects: "promoting coordinated development in the development model, controlling speculative risks in development risks, and expanding on-market channels on development carriers" to strengthen China's carbon finance and carbon market capabilities.

In fact, financial institutions have successively carried out carbon finance activities, among which commercial banks have launched carbon finance products and services more frequently. For example, Shanghai Rural Commercial Bank successfully landed CCER pledge credit business; The online trading of carbon sinks in Linpan, Chuanxi, Tianfu New Area, Sichuan, was officially reached, which also means that the independent ecological carbon sink project has achieved value compensation through online listing in the carbon sink market for the first time nationwide. Bank of Qingdao Laiwu Branch issued a loan of 10 million yuan to Shandong Sunshine Power Co., Ltd., which is the first carbon emission disclosure support loan in China; In September, the carbon accounting platform of financial institutions was unveiled at the China International Fair for Trade in Services...

Despite the rapid development, China's carbon financial market is still facing problems such as insufficient liquidity, inactive spot trading for the purpose of fulfillment, and too few carbon financial varieties, in this regard, Lai Xiaoming, chairman of the Shanghai Environmental Exchange, proposed to accelerate the innovation of carbon financial products, vigorously develop carbon financial products and businesses, and promote the improvement of China's carbon trading market. At the same time, we should give full play to the supporting role of carbon finance in the low-carbon transformation of the real economy, and provide a large amount of financial support for the low-carbon development of enterprises through the innovation of carbon finance products.