(Through the observation of things) The global carbon market construction process continues to advance, and the coverage will be further expanded
China News Service, Beijing, July 20th. Title: The global carbon market construction process continues to advance and the coverage will be further expanded
China News Agency reporter Ruan Yulin
In the past year, many countries and regions around the world have continuously promoted their carbon market construction process.
Authorities have pointed out that in the foreseeable future, the coverage of the global carbon market will be further expanded.
In the long run, exploring how to link the carbon markets in various regions is an important direction for promoting low-cost emissions reduction on a larger scale in the world to deal with climate change.
On July 16, China announced the official launch of the national carbon market.
This year is the first compliance cycle of the national carbon market. It has included 2,162 key emission units in the power generation industry, covering approximately 4.5 billion tons of carbon dioxide emissions, making it the world's largest carbon market.
An important milestone in the global solution to climate and environmental issues
"The operation of China's national carbon market is an important milestone for China and the world to use market mechanisms to solve climate and environmental issues," Zhang Jianyu, chief representative of the Beijing Representative Office of the U.S. Environmental Protection Association, said in an exclusive interview with a reporter from China News Agency a few days ago. In the future, with the further improvement of China's national carbon market, it can provide a wealth of experience for more countries and regions along the “Belt and Road” and play a leading role as a good example through the establishment of cooperation and dialogue mechanisms.
Since the 1990s, the U.S. Environmental Protection Association has assisted the former State Environmental Protection Administration in launching China’s first sulphur dioxide emissions trading pilot project; since 2011, it has assisted relevant Chinese authorities in the design of the pilot carbon market and the national carbon market. , Training and testing to provide support for the operation of the national carbon market.
Zhang Jianyu said that China's national carbon market initially covered the power industry and has become the largest carbon market in the world.
As a developing country, China announced in 2020 the goal of achieving a carbon peak by 2030 and achieving carbon neutrality by 2060, which reflects China's confidence and determination to tackle climate change.
How is the international carbon price formed?
"Similar to traditional commodities and financial markets, the formation of carbon prices is mainly affected by the relationship between supply and demand," Zhang Jianyu said. From the perspective of supply, the biggest feature is that the carbon market is a policy tool, and the relevant policies and rules for allowance allocation are determined. And intertemporal storage and other related regulations will have a greater impact on carbon prices; from the demand side, carbon prices will also be affected by many aspects such as macroeconomics, energy prices, and future investment expectations.
Zhang Jianyu said, “The formation of carbon prices also requires a certain degree of liquidity and market activity as a guarantee. At present, the EU and the United States have complete spot and derivatives trading markets, and investment institutions are allowed to participate in transactions. This is necessary for effective and stable carbon price signals. The formation is of great significance".
Zhang Jianyu believes that the core of the carbon market to promote greenhouse gas emission reduction is to promote the low-carbon transformation of society in the most economical and effective way by discovering the optimal emission reduction cost. At the same time, the carbon market can form a predictable carbon price signal and guide Control the investment of enterprises and even the whole society, as well as the assessment and accounting of climate risks.
In addition, relying on a unified data reporting platform for the carbon market can further improve the accuracy of climate information disclosure, strengthen social supervision of key emission companies, and form an opposing mechanism from the side.
Global carbon market coverage will be further expanded
The global carbon market map compiled by the International Carbon Action Partnership (ICAP) includes carbon markets currently being implemented, planned to be implemented, or under consideration for establishment.
As of January 31, 2021, there are 24 operating carbon markets worldwide.
In addition, eight carbon markets are currently under planning and are expected to start operations in the next few years.
These include the Carbon Market in Colombia and the Transportation and Climate Initiative (TCI-P) in the northeastern United States.
Zhang Jianyu believes that in the foreseeable future, the coverage of the global carbon market will be further expanded. At present, 14 countries and regions, including Chile, Turkey and Pakistan, are exploring the possibility of establishing a carbon market and how to integrate the carbon market with it. The existing climate policies are combined, and the carbon market that is already in mature operation will further tighten the total set according to its climate targets, expand the industry coverage, and improve the market design.
"The offset mechanism will also become an important part of countries' achievement of their climate goals on a global scale, and it will also become a bright spot in the development of the global carbon market," said Zhang Jianyu. In the long run, exploring how to link the regional carbon markets. It is an important direction to promote low-cost emissions reduction on a larger scale in the world to deal with climate change.
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