Carbon Neutralization Policy Support: Carbon Trading and Green Finance

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Polaris Atmospheric Network News: This paper discusses the investment opportunities brought by the supply and demand pattern and price changes of various industries from the perspective of the impact of carbon constraints and carbon trading mechanism on industries such as iron and steel nonferrous metals, energy and chemical industry, building materials, electricity reform, transportation, light industry and new energy vehicles. This is a selected report for you. Chapter 3: Policy support for carbon neutrality: carbon trading and green finance.

(1) Carbon Trading: Quota and Pricing

While the emission reduction market is booming, China has also put the plan to build a quota trading market on the agenda. 2011/0 In June, the National Development and Reform Commission issued the Notice on Launching the Pilot Work of Carbon Emission Trading, and approved Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong and Shenzhen to launch the pilot work of carbon emission trading. This notice opened the door for China to build a carbon market. In the following ten years, the China municipal government issued various policies, constantly explored and extended the pilot experience to the whole country. Finally, in 200211year 10, the National Measures for the Administration of Carbon Emissions Trading (for Trial Implementation) was adopted, which clarified the definition of the national carbon market and included key emission units in standards, quota total setting and allocation, trading subjects, verification methods, reporting and information disclosure, supervision and default.

The construction of quota carbon market in China can be divided into the following important parts: 1. Determine the coverage and total target; 2. Determine the quota allocation; 3. Measurement, Reporting and Verification (MRV) and 4. Implementation mechanism construction.

Determine the total quota and coverage: In 20 18, the State Council adopted the National Scheme for Setting and Allocating the Total Carbon Emission Quota, which clarified the principles for setting the total carbon market and quotas in China. There are usually two methods to set the total quota, namely "top-down method" and "bottom-up method". The former sets quotas from a macro perspective according to the emission reduction targets of carbon emission intensity and total carbon emission and the level of economic development; The latter starts from the entity enterprise and estimates the total quota according to the sum of the annual emissions of the emission control enterprises. China currently adopts the principle of combining the two methods. The national carbon market covers eight major industries, including petrochemical, chemical, building materials, steel, nonferrous metals, paper making, electric power and aviation, including crude oil processing, ethylene, calcium carbide and other 18 sub-industries. In addition, other enterprise-owned power plants are also included in the power generation industry.

Distribution mode: There are two ways of quota distribution: free distribution and paid distribution. The commonly used methods of free distribution are historical method, historical intensity method and baseline method. Paid issuance is mainly divided into auction and fixed-price sales. At present, China mainly adopts the method of free distribution, and will gradually increase the proportion of paid distribution in the future.

MRV:MRV is a noun combination, that is, "measurement, reporting and verification", which is an indispensable process to supervise the normal operation of the carbon market. The National Development and Reform Commission and the Ministry of Ecology and Environment have issued notices for many times, demanding that the annual carbon emission report be verified and the emission monitoring plan be formulated.

Compliance mechanism: carbon market compliance includes two aspects: first, emission control enterprises need to submit compliance monitoring plans and emission reports on time; Second, emission control enterprises must complete the settlement of carbon quotas according to the actual annual emission targets within the time limit stipulated by local competent authorities. Compliance is an important link in carbon emissions trading. Without a perfect compliance mechanism, the credibility and binding force of the carbon market will be severely hit. Although different carbon trading pilot cities in China have different penalties for violations, from the compliance rate, the historical compliance rate of six pilot cities except Chongqing is 96%, so it can be considered that the domestic carbon market compliance mechanism is relatively perfect.

Overview of trading situation: As of 20 19, among the seven pilot areas of carbon trading, six pilot areas in Beijing, Tianjin, Shanghai, Guangdong and Shenzhen have fulfilled their obligations, and five in Hubei and Chongqing have fulfilled their obligations. More than 2,900 emission enterprises and units have been included in the seven pilot carbon markets, and the total amount of carbon emission quotas allocated is about 6.2 billion tons. In 20 19, the total amount of quota transactions in seven pilot carbon markets was about 229 1 10,000 tons, and the transaction amount reached was about 770 million yuan. In terms of transaction price, Beijing has the highest average transaction price, reaching 55 yuan/ton, Hubei has the largest transaction volume and transaction scale, but the price is lower, only 22.6 yuan/ton, and Chongqing has the lowest average transaction price, only 16.7 yuan/ton. Since the establishment of the pilot, the transaction volume has gradually increased, indicating that enterprises have accepted the carbon market and actively carried out carbon management. However, judging from the average transaction price, the average carbon price in China is low, which is far from the target of 75- 100 USD/ton.

Green Finance: Support and Leverage

1, historical background and basic concepts

Since the industrial revolution, the impact of human activities on the natural environment has increased exponentially, but human understanding of the negative impact of highly developed industries is obviously lagging behind. It will take some time to realize the seriousness of the negative impact and explore a reasonable and sound solution. It was not until the late 20th century that human beings realized that the problems of environmental pollution and climate change could not be solved by policy control at the source or technical management at the end, but also by rational allocation of resources and guiding the flow of funds to green industries. In this context, the concept of green finance came into being.

Green finance means that the financial sector regards environmental protection as a basic policy, considers the potential environmental impact in investment and financing decisions, integrates the potential benefits, risks and costs related to environmental conditions into the daily business of finance, pays attention to the protection of ecological environment and the control of environmental pollution in financial business activities, and promotes the sustainable development of society through the guidance of social and economic resources.

2. Development process

As a branch of environmental economics, green finance is a typical interdisciplinary subject of natural science and humanities, and its development cannot be separated from a series of new understandings of human beings in the fields of nature and humanities. In this part, we will summarize the relevant theories and important social and historical events from the perspective of theory and practice, and sort out the whole process of the birth of the concept of green finance.

Human understanding of environmental pollution, like climate problems, began in the middle of the 20th century. 1952 London fog and haze incident caused nearly 12000 deaths, which sounded the alarm for governments all over the world. Silent Spring (1962) is a world-famous book, which has aroused people's extensive concern about environmental issues. 1972, the think tank "The Club of Rome" published the article "The Limit of Growth", which put forward the concept of sustainable development for the first time, which triggered a wide-ranging discussion among economists on the market failure caused by the externalities of environmental pollution, and environmental economics was born. Most economists believe that because the environment has the attributes of public goods, that is, non-exclusive and competitive, and its property rights are unclear (policy restrictions and terminal governance mentioned at the beginning of this chapter), it is difficult to solve the problem by traditional means. The main task of the financial industry is to allocate capital to the most productive industries in order to maximize the return on investment. The academic circles believe that giving full play to the function of financial resource allocation, promoting the flow of funds to environment-friendly enterprises and obtaining long-term investment value are important supplements to traditional means, and the concept of green finance was born.

In the field of practice, 1974, the Federal Republic of Germany established the world's first "GLS Bank" focusing on social and ecological business, which became an early exploration of green finance. From 65438 to 0992, the United Nations Environment Programme (UNEP) and a number of banks jointly issued the Statement on Banking Environment and Sustainable Development, which marked the formal establishment of UNEP Banking Plan (UNEP BI). 1995, the United Nations Environment Programme extended the plan to the insurance industry, and together with Swiss Re and other companies, issued the Statement of the Insurance Industry on Environment and Sustainable Development. From 65438 to 0999, then UN Secretary-General Kofi Annan initiated the initiative of establishing a global compact, calling on global enterprises to fulfill their social responsibilities and be good corporate citizens. This contract expands the connotation of green finance. In addition to the environment, human rights, labor, anti-corruption and other principles are also taken into consideration by investment institutions, and the current hot ESG (Environment, Society and Corporate Governance) investment also stems from this. Subsequently, the United Nations issued the principles of sustainable investment (PRI, 2006), sustainable insurance (PSI, 20 12) and sustainable banking (PRB, 20 19), which are isomorphic with the current United Nations green financial system. After the publication of this principle, many well-known financial institutions around the world responded one after another. By the end of 20 19, 22 domestic financial institutions such as Huaxia Fund, Bosera Fund and southern fund had signed the PRI principle.

3. Overview of the development of green finance in China.

China is the first economy in the world to establish a relatively complete green financial policy system. In 20 16, the People's Bank of China launched the Guiding Opinions on Building a Green Financial System, and established the first green financial policy framework system formulated by central government departments. In recent years, the construction of green financial standards in China has been accelerating, the statistical system of green finance has been continuously improved, the disclosure of environmental information by market participants has become increasingly standardized, and the active collection mechanism of environmental law enforcement information has gradually matured. At the same time, China is also an important advocate and leader of global green finance. 20 16 At the G20 Summit in Hangzhou, China proposed to put green finance on the agenda (for the first time). In 20 19, the Belt and Road Green Investment Principles were released and signed by 27 institutions around the world.

In terms of market scale, the total demand for green financial funds in China was only 250 billion yuan in 20 15 years, and it has rapidly increased to 2 1 trillion yuan in 20 18 years, but the total supply was10.3 trillion yuan, and the gap between supply and demand was 0.8 trillion yuan. According to the forecast of Deutsche Bank, the scale of China's green financial market will increase to 100 trillion yuan in 2060. In recent years, the scale of green loans and green bonds in China has also expanded rapidly. By the end of 2020, the balance of green loans in China has reached 1 1.95 trillion yuan, ranking first in the world. At the same time, in 20 19, China became the world's largest source of green bonds with a total circulation of 386.2 billion yuan (55.8 billion US dollars).

In terms of information disclosure, the environmental information disclosure of market players in China is increasingly standardized, and the quality of environmental information disclosure of financial institutions is significantly improved. Listed companies with major pollutants are forced to disclose environmental information. About 27% of A-share listed companies have published environmental, social and governance reports, and this proportion is as high as 86% among the Shanghai and Shenzhen 300 companies. However, there is still a long way to go before 84% of listed companies in Hong Kong stocks release ESG reports, and there is a broad space for future development.

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