BEIJING/SINGAPORE, Sept 12 (Askume) – China is seeking public feedback on a plan to bring cement, steel and aluminium production into its carbon emissions trading scheme (ETS) by the end of this year , hoping it will boost markets and increase liquidity.
Here are some facts about carbon markets in the world’s biggest emitter of greenhouse gases.
How is China’s carbon market?
China’s carbon market consists of a mandatory emissions trading system (ETS) and a voluntary greenhouse gas (GHG) emission reduction trading market, also known as China Certified Emission Reductions ( CCER).
The ETS will eventually cover eight major emitting industries including power generation, steel, building materials, non-ferrous metals, petrochemicals, chemicals, paper manufacturing and civil aviation, which account for 75% of China’s total emissions.
The two schemes operate independently but are linked through a mechanism that allows companies to purchase CCERs on the voluntary market to achieve compliance objectives under the ETS.
What is the carbon emissions trading system?
China’s mandatory carbon market ETS will begin trading on the Shanghai Environment and Energy Exchange in July 2021. In the first phase, it covers more than 2,000 major emitters in the power sector, each emitting at least 26,000 tonnes per year. The same restrictions also apply to the steel, cement and aluminium industries.
Under the scheme, companies will get free Certified Emission Allowance (CEA) allowances. If actual emissions within a certain compliance period exceed a company’s quota, more permits must be bought in the market to make up the difference. If its emissions are lower, the remainder can be sold to the CEA.
Allocations are decided not on absolute emissions levels but on government-set benchmarks for industry carbon intensity that decline over time. Emitters are obliged to submit key parameters monthly and report emissions data annually.
Since its inception, it has become the world’s largest emissions trading platform, covering about 5.1 billion tonnes of carbon dioxide equivalent, around 40% of China’s total.
By the end of 2023, the trading volume of the national carbon emissions trading system is expected to reach 442 million tons, worth 24.92 billion yuan ($3.5 billion), according to official data.
The addition of three additional sectors is expected to bring an additional 1,500 major emitters and 3 billion tonnes of emissions within the scope of the ETS, increasing demand for credits and potentially raising prices.
The price of carbon in the national carbon trading market has risen with the reduction in quotas, it is generally much lower than the overseas market, but on April 24 it exceeded 100 yuan per ton for the first time.
What is CCER?
Beijing released its national voluntary greenhouse gas report in January. Emissions Reduction Trading Market, known as CCER. The reintroduction of carbon emission reduction measures, known as carbon abatement, allows wider participation in the carbon market.
In 2017, registration and issuance of CCERs was partially suspended due to low trading volumes, but existing quotas are still available for trading.
The inclusion of more sectors in the mandatory carbon market is expected to increase demand for CCERs, as major emitters will be allowed to use voluntary market credits to offset up to 5% of their total emissions.
(1 USD = 7.1196 RMB)
