Yesterday China rocked the move to a nationwide carbon trading market, in what could be one of the most important steps taken to reduce greenhouse gas emissions by 2021, if markets can work effectively.
China is the world’s largest emitter of greenhouse gases and its share of global emissions production continues to grow.
As the Chinese government strives to reduce its impact on the environment, policies such as a carbon trading system could boost the adoption of new technologies, increasing the demand for goods and services from domestic startups and technology companies around the world.
Carbon markets, established in parts of the United States and across Europe, put a price on industrial emissions and force companies to offset those emissions by investing in projects that would remove an equivalent share of gas from greenhouse effect of the atmosphere.
They are a key part of the 2015 Paris Agreement, but they are also controversial. Indeed, if they are not properly implemented and effectively managed, they can constitute a “massive loophole” for issuers, as Gilles Dufrasne, Policy Officer at Carbon Markets Watch said. Hour
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Last year.
This is especially true in China. Corruption in China is rampant, and the country has long sacrificed its environmental policy and administration on the altar of economic growth. China isn’t the only one that made this calculation, but the decisions were made on a scale much larger than almost any other country (except the United States)
The effectiveness of politics is also affected by the hierarchies that exist within the bureaucracy of the Chinese Communist Party. Como China Diálogo anotado, las medidas fueron emitidas por el Ministerio de Ecología y Medio Ambiente, que tiene una autoridad legal menor que si provinieran de la NDRC, el principal organismo de gobierno para la política macroeconómica en China y el supervisor de las grandes iniciativas económicas from the country.
That being said, no country as large as China, which accounts for 28% of global greenhouse gas emissions, has ever established a national carbon emissions trading market.
BEIJING, CHINA – MARCH 20: Chinese President Xi Jinping delivers a speech during the closing session of the National People’s Congress (NPC) at the Great Hall of the People on March 20, 2018 in Beijing, China. (Photo by Lintao Zhang / Getty Images)
China began testing regional emissions trading systems in 2011 in Shenzhen, Shanghai, Beijing, Guangdong, Tianjin, Hubei, Chongqing and Fujian. Using a system that instituted emissions ceilings based on carbon intensity (emissions per unit of GDP) rather than an absolute cap on emissions, the Chinese government has started implementing these pilot projects in its sector. energy and other industries.
After restructuring in 2018, the plan, originally drafted under the auspices of the National Development and Reform Commission, was transferred to the Ministry of Ecology and Environment. The return of China’s peak trade and emissions agenda came as the United States pulled out of the Paris Agreement amid abdication of climate regulations or initiatives under President Donald Trump.
Originally slated to begin business simulations in 2020, China’s emissions programs were derailed by the COVID-19 pandemic and returned in the second half of the year with real commercial implementation from yesterday.
So far, the emissions trading system covers the Chinese energy industry and around 2,000 power generation facilities. This alone accounts for 30% of the country’s total emissions, and over time the trading system will encompass heavy industry like cement, steel, aluminum, chemicals, and oil and gas. . according to ChinaDialogue.
As a first step, the government allocates allowances free of charge and will start auctioning allowances “at the appropriate time depending on the situation”.
This kind of language, and the concerns raised by state-owned enterprises and financial services companies about the effect that carbon pricing could have on profitability and credit risk, show that the Beijing government is still giving more money. importance of economic benefits versus environmental costs. much of its industrial growth.
That said, a survey of market participants cited by ChinaDialogue indicated that prices are expected to start at 41 yuan ($ 6.3) per tonne of CO2 and increase to 66 yuan per tonne in 2025. The price of CO2 is expected to start at 41 yuan (6.3 USD) per ton of CO2. Carbon in China will reach 77 yuan by 2030.
Meanwhile, a carbon pricing commission formed in 2017 and led by economists Joseph Stiglitz and Nicholas Stern has said the carbon price is expected to be between $ 40 and $ 80 by 2020 and between $ 50 and $ 100 d ‘by 2030 if markets and prices were to have some impact on behavior.
No country has met these price targets, although the European Union has been closest and, as a result, has seen the greatest reduction in greenhouse gas emissions.
Still, the Chinese government’s plan includes public reporting requirements for company-level verified emissions. And the existence of a market, if the government decides to set real prices, and the consequences of bypassing the system, could be a boon for monitoring and management equipment startups that are developing technology to track emissions. .
As ChinaDialogue analysts note:
“The hardest part of pricing carbon is often getting started. When the Chinese government decides to increase its ambition with the national ETS, it can. The mechanism is already in place and could be stepped up if the momentum and political will provided by President Xi’s climate ambition continues. In the years to come, this could lead to an absolute and declining cap, more sectors covered, more transparent data provision and more effective intergovernmental coordination. This is especially true in the case of industrial and energy regulators, who should not see the ETS as a threat to their territory, but as a measure with significant collateral benefits for their own political objectives.