Ma Jun, founding director of the Institute of Public and Environmental Affairs, speaks about China’s carbon dioxide emissions. CHINA DAILY
The carbon accounting system should be improved to help more sectors join the emissions trading market and facilitate the country’s carbon peak and neutrality. Ma Jun, founding director of the Institute of Public and Environmental Affairs, made the remarks in an interview.
“Although China’s national ETS (emissions trading system) has become the world’s largest market as it covers the largest amount of greenhouse gas emissions, our market for carbon trading is not vibrant enough, and the carbon price is also much lower than that in the European Union carbon market,” Ma said. Currently, only China’s power industry can participate in carbon trading, he added.
Using those power companies that were initially involved in carbon trading as an example, Ma said there were two main considerations when choosing the power-generation sector as the breakout point in the national carbon market: The power-generation sector consumes coal directly and thus has by far the most carbon dioxide emissions; and the sector has a more-straightforward monitoring and accounting system, therefore a more-credible carbon inventory database.
A more-developed carbon trading market could provide greater incentives for enterprises to reduce carbon emissions, Ma added.
Since an important factor of an ETS is how many carbon allowances are assigned to companies, “if a company’s carbon intensity is exceedingly higher than the industry criteria, then it may have to either pay to cut back its emissions or purchase additional carbon allowances from others,” Ma said.
Ma also said that the transparency of the market should be enhanced. “Accurate and effective access to carbon emissions data is a necessary prerequisite for the ETS to function properly, but most of companies joining the trade have yet to make their disclosure as required by the rules of the market,” he said.
A mature emissions trading program will help tilt the economics in favor of renewables versus fossil fuel energy, promoting a virtuous cycle of carbon emissions reduction, he said.
More participants like financial institutions and individual investors eventually will be involved in the trade. However, it should happen only after the infrastructure and governance of the system are enhanced, Ma said.
“The regulators hope to see a smooth commencement of the national ETS, with the carbon price neither too high nor too low, without huge fluctuations. But over the long run, the price of carbon needs to reflect the cost to reduce emissions. Otherwise, it would not provide an incentive for many institutional investors,” Ma said.