Dimitri de BoerChina Carbon Forum
Renato RoldaoICF
Huw SlaterChina Carbon Forum
Qian GuoqiangSinoCarbon
2017.
November 2017
2017CHINA CARBON PRICING SURVEY
I
Abstract
This report summarises the results of the 2017 China Carbon Pricing Survey. The survey elicitedexpectationsaboutthefutureofChina’scarbonpricefromstakeholdersincarbonmarketsinChinabetweenMayandJuly2017.Theresultsofthesurveygivestrongconfidencethatcarbonpricelevelsin China will rise over time, and that carbon pricing will increasingly affect investment decisions.China has announced that a national emissions trading system will start by 2017. However, onaverage, the survey respondents’ expectation is that it could take until at least 2020 before thenational ETS is fully functional. In the leadup to thenational ETS, significant capacitybuildinghasbeen conducted, butmuchmore is needed. A largemajority of respondents prefer a strong legalbasisfortheETSfromitsinitialphase,withatleastStateCouncilregulationinplace.ETSisexpectedtobecomethemostimportantpolicyinstrumenttomotivatecompaniestoreduceGHGemissionsinthecomingdecade.There isstrongconfidencethatChinawillmeet itstargettopeakemissionsby2030.Manyexpectthatthepeakinemissionswillbereachedsignificantlyearlier.
KeywordsCarbonpricing,emissionstrading,carbonmarket,publicpolicy,stakeholdersurvey,China
SuggestedCitation:
DeBoer,D.,Roldao,R.,Slater,H.,Qian,G.,2017,The2017ChinaCarbonPricingSurvey,November2017,ChinaCarbonForum,Beijing
Addressforcorrespondence:PeterEdwards,ChinaCarbonForumAddress:ZhengjueHutongno.5,Xinjiekou,XichengDistrict,BeijingCHINA100035Phone:+86-13051228667Email:[email protected]
II
Acknowledgements:
ThesurveywasconductedbyChinaCarbonForum,ICF,andSinoCarbon,withinputsfromTsinghuaUniversityChinaCarbonMarketCenter,andtheDutchEmissionsAuthority(NederlandseEmissieautoriteit,NEa).ItreceivedfundingsupportfromtheRoyalNorwegianEmbassyandtheEmbassyoftheKingdomoftheNetherlandsinBeijing.
TheauthorsDimitrideBoer,RenatoRoldao,HuwSlaterandQianGuoqiangwouldliketothankalloftheotherorganisationsandindividualswhohavecontributedtomakethisreportpossible.
Wearegratefultothekeyadvisorsofthesurveyandreport:WangTieoftheNationalandDevelopmentReformCommissionClimateChangeDepartment,Prof.ZouJi,ChiefRepresentativeforEnergyFoundationChina,LiuShuang,EnergyFoundationChina,Prof.WangYiofChinaAcademyofSciences,andProf.DuanMaoshengofTsinghuaUniversity.
Wearegratefulforthecontributionsofexpertpeerreviewers:WangShuofICF,LiuYuofChinaAcademyofSciences,HughKaterofChinaCarbonForum,andErikvanAndelandStevenBankoftheDutchEmissionsAuthority.
ProfessorFrankJotzooftheCentreforClimateEconomicsandPolicyatAustralianNationalUniversitydeservesaspecialmention,ashewastheinitiatorandleadauthoroftheinitialsurveyin2013,whichservedasthestartingpointfortheseriesofsurveys,andheprovidedadvicetotheteam.
PeterEdwardsofChinaCarbonForummanagedtheproject,andLydiaJacksonandVincentGuprovidedsignificantassistanceinthepreparationofthisreport.LuluZhaoofEDFsupportedthedisseminationofthesurvey.
Finally,wewouldliketothankHuangXiaochenandLaiHanfromSinoCarbon,andLiuMengxingfromClientEarthwhohelpedwiththetranslationofthereport.
III
Table of Contents
TableofContents...................................................................................................................................III
Executivesummary.................................................................................................................................V
Surveyintroduction.................................................................................................................................1UpdateoncarbonemissionstradinginChina........................................................................................3
SurveyingChina’scarbonpricingstakeholders.......................................................................................9
Thepilotemissionstradingsystems.....................................................................................................12
Nationalemissionstradingsystem.......................................................................................................15Readinessforemissionstrading............................................................................................................23
Impactsofcarbonpricingoninvestment..............................................................................................27
Carbonpricingincontext......................................................................................................................29
LinkingChina’snationalETSwithothersystems..................................................................................30China’snationalemissionstargetsandpeakemissions........................................................................32
Appendix1:Keypoliciesissuedforthepilotsin2016-17.....................................................................34
Appendix2:CCERtradingto-date.........................................................................................................35
Appendix3:StatusofthenationalETSdesign......................................................................................38Appendix4:Surveyquestionsandaggregatedresponses....................................................................39
Projectpartnersandfunders................................................................................................................50
IV
V
Executive summary
Thisreportisasummaryofresultsfromthe2017ChinaCarbonPricingSurvey,jointlyconductedbyChinaCarbonForum(CCF),ICFandSinoCarbon,withinputsfromtheDutchEmissionsAuthority,theTsinghuaUniversityCenterforChinaCarbonMarketResearch,andotherexperts.
Thesurvey,undertakenfromlateMarchtoearlyJuly2017,obtainedexpectationsaboutthefutureofChina’scarbonpricefrom260stakeholders.Thesurveyisacollective“bestguess”bythesestakeholders.Itdoesnotclaimtoberepresentative,butitdoesprovideaclearindicationofdominantstakeholderviewsaboutthelikelyfutureofcarbonpricinginChina.Theprojectbuildsonsimilarsurveysconductedin2013and2015.
ThissurveyreportcomesatacrucialtimeofglobalinterestinChina’sclimateaction,astheUSAannouncedinmid-2017itsintentiontowithdrawfromtheParisAgreement,andanannouncementofthestartofanationalETSinChinaisexpectedstillinlate2017.
China is about to launch the largest carbon market in the world
During2013and2014,pilotcarbonmarketswerelaunchedinfourmunicipalities(Beijing,Chongqing,ShanghaiandTianjin),twoprovinces(GuangdongandHubei)andthespecialeconomiczoneofShenzhen.Eachofthepilotshavenowcompletedeitherthreeorfourcompliancecycles,providingusefulinformationforfuturepolicydecisions.
The2013and2015ChinaCarbonPricingSurveysaskedrespondentsfortheirexpectedcarbonpricesinthepilotregionsforfutureyears.Predictionscannowbecomparedwithrealpricesupto2016.Theactualaveragepricesin2016werewellbelowexpectations.Respondentstothe2013and2015surveyexpectedthatthepricesinthepilotswouldgraduallyrise,whileinfacttheysteadilydecreasedfrom2014to2016.
SincePresidentXiJinpingannouncedin2015thatChinawouldlaunchanationalETSby2017,preparationsforChina’snationalcarbonmarkethaveintensified.Requirementsforhigh-carbonemittingcompaniestoreporttheirhistoricalemissionsdatawereintroduced,andthatdatahastobesubjecttoanindependentverificationprocess.ThegovernmentisintheprocessofestablishingalegalbasisfortheETS,nowattheStateCouncillevel.Atimelineforaformallawtobeissuedhasnotyetbeenprovided,however.Capacitybuildingforcarbonmarketstakeholdershasbeenunderwayforsometime,andisincreasingthroughtheestablishmentofregionalcapacitybuildingcentresinanumberofprovinces.
ThesectoralcoverageatthebeginningofthenationalETSisnotyetclear.Eightmajorsectorsarerequiredtoreporttheiremissions,andareexpectedtoeventuallybeincludedinanationalsystem.However,recentreportshavesuggestedthatasfewasonetothreeindustriesmaybecoveredinthesystem’sopeningphase.Draftallocationplansforthreesectors(power,cementandaluminium)werereleasedbymediainMay2017.Theplansspecifybenchmarksforeachsectorandthemethodologyforcalculatingallowanceallocation.EvenifonlythepowersectorisincludedatthebeginningofthenationalETS,itwillstillbethelargestintheworldbyalargemargin-theemissionscoveredwouldbeabouttwiceasmuchasarecurrentlycoveredundertheEUETS.
Governmentguidelinesongreenfinancereleasedin2016suggestthatsupportmaybeprovidedforthedevelopmentofamorediverserangeoffinancialproductsinthecarbonmarkethoweverthesearenotexpectedtobeintroducedfromthestartofnationalETS.
VI
Respondents
Thesurveyreceived260responsesfromprofessionalsinarangeofsectors,includingindustry(26%),consultancies(25%),academia(10%),financialindustries(7%),tradingplatforms(7%)andNGOs(6%).Otherrespondentsincludethosefromresearchinstitutes,localandnationallevelsoftheChinesegovernment,andmultilateral/bilateraldevelopmentorganizations.83%ofcoveredindustryrespondentsexpectedtobeincludedintheforthcomingnationalETS,with59%ofthemhavingparticipatedinthepilots.Itislikelythatonaverage,theindustryrespondentswhichrespondedtothesurveyhavemoreexperience,areatamoreadvancedstageofpreparation,andhavemorepositiveviewstowardsthecarbonmarketthanthosewhichdidn’trespond.
Expectations about the national carbon market
TheChinesegovernmenthasrecentlyreaffirmedatCOP23thatthenationalETSisstillexpectedtobeapprovedin2017.However,whenaskedbywhenChina’snationalETSwillbefullyfunctional,only47%ofrespondentsexpectthistohappenby2020orearlier.Afurther44%ofrespondentsexpectafullyfunctionalcarbonmarketbetween2021and2025.
Sofar,thelegalbasisforthecarbonmarketisnotclear.Alargemajorityofrespondents(63%)believethatthelegalbasisforthenationalETSshouldbeanationallawonclimatechangepassedbytheNationalPeople’sCongress.Aboutathirdofrespondents(32%)believethataregulationbytheStateCouncilwouldbesufficient.Theseresultssuggestthatifanactuallawisnotimmediatelypossible,attheveryleastthereshouldberegulationprovidedbytheStateCouncilatthebeginningoftheETS.
AbouthalfoftherespondentsconsiderthattradinginthenationalETSshouldoccuracrossseveralregionalplatforms,while37%thinkthatthereshouldbeonenationalplatform.14%ofrespondentsthinkthatthereshouldbeemissionstradingexchangesineveryprovince.
Themajorityofrespondents(89%)believethatallorpartofunusedallowancesshouldbebankableforcompaniespreviouslycoveredbythepilotsystemsthatwilltransfertothenationalETS.RespondentsexpectthatcompanieswillbeabletotransferassetsfromthepilotsintothenationalETSwithouttotallylosingtheirvalue,howevertheyalsorecognisetheriskoffullbankingcontributingtoover-supplyinthemarket.Morethanhalfofindustryrespondentswerefromcompaniesthathadparticipatedinthepilotmarkets,andarethereforelikelytobemoreinfavourofbankingintothenationalETS.
RespondentsfromcoveredindustrieswereaskedwhethertheythinkthattheirorganisationisadequatelypreparedtotakepartinanETS.Theareasinwhichrespondentswereleastpreparedincludedadministratingallowances(44%)andcarbontrading(41%).
VII
Respondentsexpectcarbonemissionstradingtoincreasinglyaffectinvestmentdecisionsincomingyears.In2017,39%ofthosewhoexpressedaview,expectinvestmentdecisionstobestronglyormoderatelyaffected,andby2025thisfigurerisesto84%.Carbonemissionstradingisexpectedtoincreasinglyaffectinvestmentdecisions
Figure1Q3-1:DoyouexpecttheETSinChinatoaffectinvestmentdecisionsin2017?2020?2025?
(N=252,246,231)
WhenaskediftheyexpectChina’snationalETStobelinkedwithotherexistingtradingsystemsaroundtheworld,61%believethatlinkingwilltakeplaceby2030.Ofthoseexpectinginternationallinkages,thevastmajorityexpectalinkwiththeEUETS,andsomeexpectalinkwiththeRegionalGreenhouseGasInitiative(RGGI),SouthKoreaand/orCalifornia.
11%17%
46%28%
60%
38%43%
20%13%18%
3% 2%
2017 2020 2025
No
Yes,marginally
Yes,moderately
Yes,strongly
VIII
Price expectations
TheaveragepriceexpectationinthenationalETSisCNY38/tonin2017;CNY51/tin2018;CNY74/tin2020;CNY108/tin2025.However,thepricelevelsremainhighlyuncertain,especiallyinthemoredistantfuture.The20thand80thpercentilesfor2025areCNY50/tandCNY200/trespectively.Thefuturepriceexpectationsaremuchhigherthanatthetimeofthe2015survey.Atthattime,averageexpectationwasCNY56/tin2020,andCNY70/tin2025.
China’scarbonpriceisexpectedtosteadilyrise
Figure1Rangeofpricesinthepilotsystemsto-date,andestimatedpricesforthenationalsystemby
surveyrespondents.
Therewereslightpricevariationsbetweenindustryandnon-industryrespondents,withindustryexpectinghigherpricesafter2018.OthersimilarsurveysconductedinEuropeandAustraliatendedtowardslowercarbonpriceexpectationsfromindustry.However,our2015Chinasurveyalsoshowedanindustrytendencytoexpecthigherprices.
Carbon pricing in the mix of policy instruments
RespondentswereaskedwhattheyexpecttobethemostimportantpoliciestoreduceGHGemissionsinfutureyears(Figure3).Theexpectationisthat,overtime,theemphasiswillshifttowardsETS,environmentaltax,informationdisclosure,andenergyallowancestrading.
IX
Market-basedmeasuresareexpectedtobecomethemainpolicyinstruments
Figure3Q3-3:Whichdoyouexpecttobethemostimportantpoliciesinmotivatingcompaniesto
reduceGHGemissionsinChinaatdifferentpointsintime?(N=256,253,257)
China’s emissions targets and peak emissions
While63%ofrespondentsexpectthatChinawillsticktoanemissionsintensitytargetfor2025,amajorityexpectsthatanabsoluteemissionstargetwillbesetfor2030.Theseresultscontinuetosupportthepossibilitythat,inthenearfuture,Chinamayshiftits2030commitmentfromanemissionsintensitytargettoanabsoluteemissionstarget.
90%ofrespondentsexpectChinatoachievethecarbonemissionspeakby2030,and55%expectChina’semissionstopeakby2025orearlier.
China’semissionsareexpectedtopeakaheadof2030
Figure4Q6-1:WhendoyouexpectChina’semissionswillpeak?(N=259)
25% 26% 27%
8%16%
21%10%
13%
14%
6%
10%
13%
13%
12%
8%
17%
11%6%
21%13% 11%
2017 2020 2025
Mandatoryclosureofinefficientfacilities
Energyconservationsubsidies
Renewablefeed-intariffs
Energyallowancestrading
Environmentalinformationdisclosure
Environmentaltax
ETS
8%
17%
31%
35%
10%
Alreadypeaked Before2020 2021-2025 2026– 2030 After2030
1
Survey introduction
Thisreportpresentstheresultsfromthe2017ChinaCarbonPricingSurvey,jointlyconductedby
ChinaCarbonForum(CCF),ICFandSinoCarbon,withinputsfromtheDutchEmissionsAuthority,theTsinghuaUniversityCenterforChinaCarbonMarketResearch,andotherexperts.
Theprojectbuildsonsimilarsurveysconductedin2013and2015.Manyofthequestionsaskedwerethesameineachofthethreesurveys,andresultswerecomparedovertime.Strongeffortswere
madetosurveyrepresentativesfromChina’scarbon-intensiveindustries,whicharealreadysubjectto,oraresoonexpectedtobesubjecttocarbonpricing.
Inadditiontothesurveyitself,theprojectteamconductedtwoindustrystakeholderroundtablesonETSdesign,focusedonallowanceallocationandmonitoring,reporting,verificationandaccreditation
(MRVA).Theroundtablesinvolvedindustryrepresentativesandsectoralassociations,togetherwithgovernmentexpertsoncarbonmarketdevelopment.Theaimoftheroundtableswasto,ontheone
hand,provideachannelforcommunicationofindustryopinionsonETSdesigntopolicymakers,andontheother,toexpandthescopeofpublicdiscourseontheseimportantaspectsofthenational
system.LinkstothepublicreportsfromthetworoundtablescanbefoundontheChinaCarbonForumwebsite.
ThissurveyreportcomesatacrucialtimeofglobalinterestinChina’sclimateaction,asanationalETSisplannedtostartinlate2017.China’sgovernmenthascommittedtospecifiedemission
reductiontargets,toreducethenation’scarbonintensityoftheeconomyby40to45percentfrom2005levelsby2020,andby60to65percentby2030.1
ThissurveygaugesexpectationsbyexpertsandmarketparticipantsaboutthefutureofcarbonpricinginChina,andhowitfitsintoChina’sbroaderclimatechangemitigationefforts.Itquantifies
expectationsaboutmarketdesigndecisions,relevantpolicies,carbonprices,andtheimpactoninvestmentdecisions.Assuch,itcanmakeanimportantcontributiontoimprovingunderstandingfor
themarketsandforpolicymakers,ofhowtheprospectsforcarbonpricingareperceivedintheindustryandexpertcommunities.
Theexpectationselicitedinthisreportarebestinterpretedasanaggregationof“bestguesses”byasubsetofpeoplewhohaveknowledgeandinformedviewsaboutthefactorsthatwillaffectthe
operationofChina’scarbonmarket.Forindustryrespondents,thesurvey’ssamplemaybebiasedtowardsmarketparticipantswithahigherthanaveragelevelofpreparedness,giventhatlesswell-
preparedcompaniesmayhavelesscertaintyregardingthecarbonmarket,andthereforebelesswillingtocompleteasurvey.Thereisnoclaimthatthesurveyisrepresentativeoftheviewsofall
expertsandindustryonthesequestions,bothbecauseitisnotpossibletocreatearepresentativelistofexperts,andbecauseofself-selectionofthosewhochosetorespondtothesurvey.
1CarbonintensityreferstothelevelofcarbonemissionsperunitofGDP(CO2/CNYGDP).
2
Theexpectationsaboutfuturecarbonpricesderivedfromsurveyssuchasthisonedifferconceptuallyfromforwardpricesinmarkets,whichreflectmarketexpectationsbutadjustthemfor
riskandaresubjecttodemandandsupplyofcapital.Theyalsodifferconceptuallyfromforecastsofpricesthatarebasedonquantitativeanalysisofunderlyingmarketfactors,andassumptionsabout
policysettings.
ThisreportbeginswithanupdateonthestatusofcarbonemissionstradinginChinato-date.Itthen
outlinesthekeyresultfromthesurvey,coveringtheexperienceofthepilotsystems,expectationsaboutthenationalsystem,thereadinessofenterprises,theimpactofcarbonpricingoninvestment
decisions,theroleofETSinrelationtootherpolicies,theprospectforlinkingChina’scarbonmarketwithinternationalones,andexpectationsaboutthepeakingofChina’scarbonemissions.
3
Update on carbon emissions trading in China
During2013and2014,pilotcarbonmarketswerelaunchedinfourmunicipalities(Beijing,Chongqing,
ShanghaiandTianjin),twoprovinces(GuangdongandHubei)andthespecialeconomiczoneofShenzhen.Inthelasttwoyears,pilotregionshavefurtherdevelopedtheirmarketsbyexpanding
coverage,refiningtheirallocationmechanisms,andintroducingderivativeproducts.Forasummaryofkeypoliciesissuedforthepilotsin2016-17,seeAppendix1.
SincePresidentXiJinpingannouncedin2015thatChinawouldlaunchanationalETSby2017,preparationsforChina’snationalcarbonmarkethaveintensified.Requirementsforhigh-carbon
emittingcompaniestoreporttheirhistoricalemissionsdatawereintroduced,andthatdatahastobesubjecttoanindependentverificationprocess.Thegovernmenthasalsobeguntheprocessof
establishingalegalbasisfortheETS,withtheStateCouncilhavingpreviouslylistedtheETSregulationinitsworkplanfor2016.Atimelineforaformallawtobeissuedhasnotyetbeen
provided,however.Sinceearly2016,thecentralgovernmenthasissuedseveraldocumentswithinformationrelevanttotheoperationofthenationalsystem,howevermanyaspectsofthenational
ETSareyettobedisclosedatthetimeofpublication.Belowweprovideasummaryupdateofprogressto-dateandtheimportantpolicydecisionstomadeinthenearfuture.
Recent highlights
HistoricaldatareportingandverificationhasstartedThesectoralcoverageofthenationalETSwasdefinedinanoticeissuedbytheNational
DevelopmentandReformCommission(NDRC),inJanuary2016.Inaddition,provincesandmunicipalitiesweremandatedtocommencetheprocessofhistoricaldatareporting,verification,
examinationandsubmission.InFebruary2016andMarch2017,China’smostseniorclimatechangeofficialNDRCDeputyDirectorZhangYonghostedseveralteleconferencesdedicatedtoarrangements
andmobilizingallprovincialDRCsregardingthedevelopmentofthenationalETS,andemphasizingtheneedtofurtheradvancepreparatoryworkforthenationalETSduringthefinalstretch.
UncertaintyaboutlegalframeworkInthe2016LegislativeWorkPlanissuedbytheGeneralOfficeoftheStateCouncilinMarch2016,
regulationonETSwaslistedinreserveforconsiderationasanadministrativeregulation.Theregulationwasnotincludedinthelegislationplanfor2017,however,leavingsomeuncertaintyasto
thelegalbasisoftheETSduringitsinitialstage.
UncertaintyaroundsectoralcoverageofnationalETSInanNDRCnoticeinMay2016,thesectoralcoverageofNationalETSwassettoexpandtoincludeadditionalsubsectorsofthechemicalindustry,aswellasoftheironandsteelindustry2.However,
2The“NoticeonFurtherNormalizationofSubmissionoftheListofEnterprisestoParticipateintheNationalETS”was
issuedonMay13th,2016.Thecoveragewasadjustedtoincludebasicchemicals,fertilizer,pesticidesandsynthetic
4
theNDRChassinceindicatedthatitintendstoshrinktheinitialcoveragefromeightsectorstothreeorless,citingconcernsrelatingtodataqualityforbenchmarkingdevelopmentandthecapacityof
somerelevantindustries.3
NationalETScapacitybuildingcentresestablishedFocusingonstrengtheningcapacitybuildingforthenationalETS,NDRChashelpedtoestablishcapacitybuildingcentresinShenzhen,Hubei,Beijing,Guangdong,Chongqing,Shanghai,Sichuan,and
TianjinsinceMarch2016,whichprovidedanimportantguaranteeforthesmoothstartandoperationofthenationalETSinthefuture.
ExchangeforCCERsfoundedinSichuanSichuanUnitedEnvironmentalExchangeacquirednationalregistrationforaChinaCertifiedEmission
Reductions(CCER)exchangeonApril22nd,2016,makingittheeighthplatformforCCERtradingafterthesevenoriginalpilotregions.TheexchangeisintendedtoallowSichuanprovincetomore
effectivelyparticipateinthenationalETS.4
CarbonfinancereceivedpolicysupportfromsevenministriesThePeople’sBankofChina,MinistryofFinance,NDRC,MinistryofEnvironmentalProtection,theChinaBankingRegulatoryCommission(CBRC),theChinaSecuritiesRegulatoryCommission(CSRC),
andtheChinaInsuranceRegulatoryCommission(CIRC),jointlyissued“GuidelinesforBuildingaGreenFinanceSystem”onAugust31st,2016.Theguidelinesproposedtoexplorecarbonfutures
trading,toencourageanorderlydevelopmentofcarbon-basedfinancialproductsandderivativesincludingcarbonforwards,carbonswaps,carbonoptions,carbonleasing,carbonbonds,carbonasset
securitizationandcarbonfunds.Theguidelinesalsosuggesteddevelopingcarbon-basedfinancingtools,towidenthechannelsforgreenfinancingbyenterprises.
FujianETSlaunchedThePeople’sGovernmentofFujianProvinceissued“InterimProvisionsforFujianETS”onSeptember
22nd,2016,generallyfollowingtheframeworkofthenationalETS,whileexploringinnovativeapproachesconcerningthesectoralcoverageandoffsetmechanisminaccordancewithFujian’s
specificcircumstances.TheFujianETSwasofficiallylaunchedinDecember2016,becomingtheeighthfully-functioningcarbonmarketinChina,afterthesevenoriginalpilotregions.
material,whilepreviouslyonlycarbide,ammoniaandmethanolwereincluded.Ironrollingwasaddedbesidescrude
steelproduction.
3Itislikelythatbenchmarkingwillbethedefaultapproachtoallowancesallocation,thereforerequiringahigher
qualityofdatathananapproachusingonlyhistoricalemissionsintensity.
4ChineseCertifiedEmissionReductions(CCER)isadomesticsystemofoffsetcreditsawardedtoGHGemission
reductionprojectsacrossChina.CompaniescoveredbyETSinChinacanuseuptoamaximumpercentageofthose
offsetsforannualcompliancepurposes.ItsdesignandsomeofthemethodologiesareinspiredbytheUN’sClean
DevelopmentMechanisms(CDM).
5
StateCouncilapprovedallowanceallocationplanTheStateCouncilofficiallyapprovedthe“NationalETSCapSettingandAllowanceAllocationPlan”in
December2016.Thequantityofemissionallowancestobeallocatedistobecalculatedbasedoneitherindustrybenchmarksorhistoricalintensities.NDRCistobedraftingtechnicalguidelinesof
allowanceallocationforeachindustryinaccordancewiththisplan,establishingcriteriafortheimplementationofallowanceallocationinprovincesandmunicipalities.
CCERregistrationwassuspendedOnMarch14th,2017,NDRCsuspendedCCERprojectregistrationandcreditissuanceinorderto
furtherreviseitsInterimMeasuresfortheAdministrationofVoluntaryGHGEmissionsTrading.Existingregisteredandissuedprojectswerenotimpactedbytherevision.
DraftallocationplanforthreesectorsreleasedInMay2017,draftallocationmethodsforpowergeneration,electrolyticaluminiumandcement
werepubliclyreleased.Abenchmarkingapproachwasappliedforallthreesectors,whilethespecificformulaforcalculatingallocationvariesforeach.Themethodologiesmaybeoptimizedand
benchmarksmaybeadjustedbasedonfeedbackreceivedpriortothelaunchofthenationalETS.
Transaction data for China’s carbon market
PilotsAsofSeptember30th,2017,197milliontonsofallowanceshadbeentradedintheprimaryandsecondarymarkets,withavalueofCNY4.5billion.In2016alone,thetradingvolumeandvalue
reached69milliontonsandCNY1.1billion,anincreaseof106%and29%respectively(Figures1&2).
Figure1Tradingvolumeofprimaryandsecondarymarketinpilots(milliontons).
3.5
28.333.3
68.6
58.9
2013 2014 2015 2016 2017(Jan-Sep)
6
Figure2Tradingvalueofprimaryandsecondarymarketinpilots(millionCNY).
Allowancepricesstayedrelativelystableduring2016-17
Beijing ThepriceinBeijingwasaboveCNY50/tonformostoftheyear.
Shenzhen ShenzhenstayedaroundCNY40/tonduringthefirsthalfof2016,thenfluctuatedbetweenCNY20-40/tonfortheremainderoftheyear.
Shanghai In2016,theShanghaipriceincreasedfromCNY10/tontoCNY27/tonaftercompletingthetransitionofallowanceswith2013-2015vintagetocurrentallowances.Thistrendlasteduntil2017,reachingnearlyCNY40/toninQ1.
Fujian Fujian’spricehasstayedaroundCNY35/tonsinceitslaunch,andfellbelowCNY30/tonduringthecomplianceseasonof2017.
Guangdong Guangdongshowedthemoststablepricetrend,fluctuatingbetweenCNY10-20/ton.
Hubei Hubeiencounteredapricedropinmid-July,whichwascurbedtosomeextentafteradjustingthedailyfallinglimitto1%.Bytheendof2016,thepricehadreturnedtoCNY20/ton.
ChongqingandTianjin
ThepricesinChongqingandTianjinstayedmostlybetweenCNY10-25/tonin2016,exceptforseveraltransactionswithanexceptionallyhighprice.However,Chongqing’spricehasdivedsharplysinceMarch2017,eventouchingCNY1/ton.
Table1Pricetrendsinpilotmarketsduring2016/17,rankedinorderofpriceatthecloseoftradingonSeptember11,2017.
205
1,157
863
1,1131,046
2013 2014 2015 2016 2017(Jan-Sep)
7
Figure3Dailyaveragepriceofonlinetrading(CNY/ton),18thJune,2013-30thSeptember,2017.
CCERs AsofSeptember30th,2017,287CertifiedEmissionReduction(CCER)projectshadbeenissued,andacumulative118milliontonsCO2hadbeentraded.BetweenJanuaryandSeptemberof2017,over42
millionweretraded,alreadyexceedingthelevelof2016(Figure7).OnlyBeijingandShanghaireleasedonlinetradingprices.ThepricerangesforBeijingandShanghaiwereCNY10-20/tonand
CNY20-25/tonrespectively.ForfurtherdetailonCCERtradingtodate,seeAppendix2.
Figure4CCERtradingvolume(milliontons).
0
20
40
60
80
100
120
140
AveragePrice�CN
Y/ton�
Shenzhen Shanghai Beijing GuangdongTianjin Hubei Chongqing Fujian
33.7
42.5 42.8
2015 2016 2017(Jan-Sep)
8
Status of the national ETS
China’snationalETSisplannedtobelaunchedin2017,representingthelargestemissionstradingsystemintheworld.Sinceitsannouncement,thepreparatoryworkhasprogressedsteadily.The
detailedstatusofnationalETSdesignto-dateandNDRC’splanfor2017andbeyondareoutlinedinFigure5.AmoredetaileddescriptionofthetasksunderwaycanbefoundinAppendix3.
Figure5Statusofnationalcarbonmarketdevelopmentprocess,asofNovember2017.
9
Surveying China’s carbon pricing stakeholders
Thesurveywasconductedanonymouslythroughasecureonlinesurveyplatform,Diaochapai,fromMarch23toJuly9,2017.ChineselanguageandEnglishlanguageversionsweremadeavailable.
ThoseinvitedtoparticipateinthissurveywereselectedfromCCF’sdatabaseofcontactsandICF’sdatabaseofcontactsinvolvedinChina’scarbonmarkets,aswellasparticipantsinthe2015survey.5Thesurveywasalsomadeavailabletopotentialrespondentsthroughtargetedsocialmediachannels,inparticularWeChat.6260eligibleresponseswereincludedintheanalysis.
The2013surveywasconductedbeforemostofthepilotsystemshadbegunoperationinChina,the2015surveyprovidedasnapshotoftheviewsaftertwoyearsofpilotoperation,andthe2017surveycomesasthecountrypreparestolaunchthenationalmarket.Thenumberofrespondentswascomparabletothe2015survey(304)andmuchhigherthanin2013(86).
ThesurveycoversasignificantnumberofChina’sexpertcommunityoncarbonmarkets,withparticularlystrongrepresentationfromkeydesigners,implementersandparticipantsofChina’sETSpilotsandafuturenationalETS,suchasacademicexperts,industry,carbontradingparticipantsandconsultancies.ItprovidesareasonableindicationofviewsandexpectationsamongChina’scarbonmarketcommunity.
TheAppendixtothisreportshowstheexactwordingofthesurveyquestions,alongwithdetailedsurveystatisticsandsomeexplanatorynotes.Withinthisreport,unlessotherwisestated,percentagesrefertotheproportionofrespondentstoaparticularquestion.PleaserefertotheAppendixtoseethenumberofnon-responsesforeachquestion.
5Noresponseswereincludedfromorganisationsinvolvedinimplementingorfundingthisproject.6ProjectpartnerSinoCarbonsharedthesurveywithitsWeChatchannel,whichatthetimehadover7,600subscribers.ThesurveywasalsosharedinseveralWeChatgroups,includingonemanagedbyICFonEU-ChinaETScapacitybuilding(over200members)andapopulargroupforcarbonindustryprofessionals,“����”(500members).Theprojectteamsoughtresponsesfromthosewithaknownroleworkingoncarbonmarketissuesfortheirorganisations,ortheirknownexpertiseonthesubjectmatter.
10
Survey respondents by groups
Ofthe260respondents,26%ofrespondentsidentifiedasbeingfromindustry(mostofwhicharetobecoveredbytheETS),withthehighestrepresentationfromthepowergeneration,chemicalsandpetrochemicalssectors.83%ofallcoveredindustryrespondentsarefromsectorsintendedtobecoveredbytheforthcomingnationalETS,with59%ofthemhavingparticipatedinthepilots.25%arerepresentativesofconsultancieswhoseworkrelatestocarbonpricing.TheserespondentshavetypicallybeeninvolvedinadvisinglocalandnationalgovernmentsontheestablishmentofETSpilotsaswellaspreparationforanationalETS.10%ofrespondentsworkinacademia;7%workinthefinanceindustry;7%arefromcarbontradingplatforms;6%fromNGOs;5%fromgovernmentresearchinstitutes;3%arefromindustryassociations;3%fromlocalgovernmentand2%fromcentralgovernment.Afurther5%ofresponsescamefromstakeholdersinothersectors,including:multilateraldevelopmentorganisations,foreigngovernments,individualinvestors,educationandthemedia.
Surveyrespondentsbygroup
Figure6Q1-2Howwouldyouclassifyyourorganization?
Note:totalnumberofresponsesN=260.SeeAppendixfordetails.
245(94%)respondentsusedtheChineseversionofthesurvey,and15(6%)respondentsusedtheEnglishversion.TheratioofChineserespondentsishigherthanfortheprevioussurveys(92%in2015and51%in2013),showingthatChina’scarbonmarketisincreasinglyadomesticeffort.
Industry responses
Intotal,67responsesfromindustrywerecollected,41ofwhichwerefromcompaniesthatareeitheralreadycoveredbyanETS,orwillbecoveredbythenationalETS.Oftheresponsesfromcoveredcompanies,63%identifiedthemselvesasbelongingtostate-ownedcompanies(bothcentralandprovincialgovernment-owned).
ResponsesincludedcompaniesoperatingundereachofChina’spilotETSregions,withtencompanieseachoperatingundertheBeijingandGuangdongsystems,andgoodrepresentationfromtheTianjin,ShanghaiandHubeipilots.11ofthe41respondents(27%)arecurrentlyoperatinginanETSoutsideofChina,andalmostoftheseareoperatingundertheEUETS.Forthesecompanies,workingundermorethanoneETSjurisdictionmayfacilitateexperiencesharing,industrypeertopeerlearning,andeventualintegrationacrosssystems.
11
Abouthalfofthecoveredcompaniesreportedemissionsofover1milliontce/year.Veryfewresponses(4),camefromsmallcompanieswithemissionsofunder10,000tce/year,whichisexpectedtobethethresholdforinclusioninthenationalcarbonmarket.Verylargeemittersaredominatedbystate-ownedenterprises,bothcentral(10)andlocal(5).GiventhatcentralgovernmentSOEsareamongthelargestemittersinChina,thishelpstoprovideamoreaccuraterepresentationofparticipantsinthenationalcarbonmarket.
Industryrespondentsbysizeandownershiptype
Figure7Q1-6HowmuchenergydoesyourcompanyannuallyconsumeinChina?(byenterprisetype)
(N=41)
Theindustryresponseratewaslowerthanexpected,despitestrongeffortsbytheauthorstoreachouttoindustrieswhicharecurrentlyorwillsoonbesubjecttoacarbontradingsystem.ThelowresponseratemaybebecauseofthepolicyuncertaintyintheleaduptothenationalETS–someindustryrepresentativesmaynotyetconsiderthemselvestobeinapositiontoprovideexpectationsaboutcarbonpricing.Someindustryrepresentativesmayalsohavebeenreluctantforfearofdisclosingbusinessinformationwithoutapprovals.
Responses by region
37%oftherespondentstothesurveyarefromorganisationslocatedinBeijing.61%werefromprovinceswithpilotcarbonmarkets,30%fromnon-pilotregions,withtheremaining9%fromorganisationsnotbasedinmainlandChina.
ThehighlevelofresponsesfromBeijingreflectstheconcentrationofthepolicy-making,consultancy,NGOandexpertcommunitiesinthecapitalcity,andalsobecausetheprojectpartnershavestrongernetworksinBeijing.AfterBeijing,thehighestnumberofrespondentswerefromGuangdong(9%),Shanghai(8%)andTianjin(5%),whichareregionswithwell-establishedpilots,perhapsalsoreflectingthecurrentcapacityandlevelofreadinessintheseregions.
TheconcentrationofresponsesfromBeijinghasreducedsincethe2015survey(downfrom43%),reflectingagrowingunderstandingandwillingnesstoengagewithcarbonmarketsinnon-pilotregions.
5%
10%12%
10%
5%
12%10%
37%
<10,000 10,000- 100,000 100,000- 1,000,000 Above1,000,000Tonscoalequivalentperyear
Nonstate-owned State-owned
12
Surveyrespondentsbyregion:increasinglywidespread
Figure8Q1-1Whereisyourorganizationlocated?-Numberofresponses.(N=260)
The pilot emissions trading systems
Sincethepilotcarbonmarketswerelaunchedin2013and2014,theyhaveeachnowcompletedeitherthreeorfourcompliancecycles,providingusefulinformationforinformingfuturepolicydecisions.
Prices in the pilot systems
FluctuationsinpricesinthesevenpilotsystemsareoutlinedinFigure3onpage7above.Aroundthetimeofthesurvey,pricesrangedfromCNY2/tinChongqingtoCNY51/tinBeijing(atcloseon31October2017).
The2013and2015ChinaCarbonPricingSurveysbothaskedrespondentsfortheirexpectedcarbonpricesinthepilotregionsforfutureyears.Predictionscannowbecomparedwithrealpricestodate.Respondentstothe2013surveyconsistentlyunderestimatedpricesincalendaryear2014,butoverestimatedpricesbeyondthat.Similarly,respondentstothe2015surveyoverestimatedpricesforeachofthepilotregionsin2016.Tradingdatafromthepilotregionsshowsthataveragepricesfor2016weresignificantlylowerthanthosein2014,helpingtoexplaintheshift.Figure9showsaveragepricesintwoofthelargestpilotmarkets,GuangdongandShanghai,comparedwithexpectationsin2013.
13
In2016,pricesintheETSpilotswerelowerthanexpected
Figure9DifferencebetweenaveragepricesChina'spilotETSsin2014and2016andexpectationsin
the2013and2015ChinaCarbonPricingSurveysrespectively.[Marketpricedata:SinoCarbon]
Figure10AveragepricestheGuangdongandShanghaipilotETSscomparedwithexpectationsinthe2013ChinaCarbonPricingSurvey.[Marketpricedata:SinoCarbon]
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Abouthalfofrespondentstothisyear’ssurveyexpressedaviewthatcarbonpricesinthepilotsatthetimeofthesurvey,duringthesummerof2017,werelowerthanwhattheyexpected.Fewconsideredcurrentpricestobehigherthanexpected:11%overall,including15%ofindustryrespondents.Thiscorrelateswellwiththecomparisonofexpectationsandrealpricesdisplayedabove.Seasonalfactors,suchasthecomplianceperiod,mayaffectmarketprices.However,duringtheperiodthatthesurveywasconducted,pricesinthepilotregionswererelativelystable,exceptforChongqing’swhichdroppedfromaroundCNY16toalmostzeroformuchoftheperiod.
Inmid-2017,pricesintheETSpilotswerelowerthanexpected
Figure11Q4-1HowdothecurrentpricesinETSpilotscomparewithyourexpectations?(N=201)
Factors influencing prices
WhenaskedwhatthemainfactorsareinfluencingpricesintheETSpilots,alargemajorityofrespondents(209outof260)identified‘capsettingandfeeallocation’asthemostimportantfactor,whilstamajority(196outof260)alsoidentified‘governmentregulationandintervention’asafactor.Otherfactorswerealsoconsideredimportant,with124selecting‘informationtransparency’,117selecting‘economicgrowthrate’,and70choosing‘complianceperiod’.Contrarytothe2015survey,governmentrespondentsnowidentify‘governmentregulationandintervention’asthemostimportantfactorininfluencingprices.
Factorsinfluencingpricesbyrespondentgroup
Figure12Q4-2Inyouropinion,whatarethemainfactorsinfluencingpricesintheETSpilots?(N=259)
51%
51%
34%
39%
15%
10%
Industry
Non-industry
PriceslowerthanIexpected PricessimilartowhatIexpected PriceshigherthanIexpected
37%
29%
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Industry(coveredandnon-covered)
Consultants&exchanges
Government(nat.,localandresearch)
Others(academia,finance,NGOsetc.)
Capsettingandfreeallocation ComplianceperiodEconomicgrowthrate InformationtransparencyGovernmentregulationandintervention
15
National emissions trading system
SincePresidentXi’sannouncementinSeptember2015,preparationforthelaunchofanationalemissionstradingsystemhasbeenledbytheClimateChangeDepartmentoftheNDRC.ThenationalETScouldbecomeakeycomponentofChina’sambitiontocontrolitsgrowingcarbonemissions.
Start of national ETS
DespitetheChinesegovernment’sannouncementthatanationalETSwouldbeestablishedduring2017,whenaskedbywhenChina’snationalETSwillbefullyfunctional,only47%ofrespondentsexpectthistooccurby2020orearlier.7Afurther44%ofrespondentsexpectafullyfunctionalcarbonmarketbetween2021and2025.Thisuncertaintyregardingshort-termdevelopmentofthemarketappliestobothindustryandnon-industryrespondents.Atthesametime,thefactthatalmosthalfofstakeholderssurveyedexpectafullyfunctionalmarketby2020,indicatesalevelofoptimismaboutthemarket,despitetheperceptionofslowprogressthisyear.
UncertaintyremainsoverwhenthenationalETSisexpectedtobefullyfunctional
Figure13Q5-2BywhendoyouexpecttheChinanationalETStobefullyfunctional?(N=256)
WhenaskedwhattheythoughttheintensityoftradingwouldbeintheETSduringthefirstcompliancecycle,alargepercentageofrespondentswhohadaviewsaid‘moderatelyactive’(84%).Asignificantproportionofrespondents(18%),wereunsureonthispoint.
Inthe2015ChinaCarbonPricingSurvey,83%ofrespondentsindicatedthattheythoughtacarbontaxwouldeventuallybeintroducedinChina.Thisyear’ssurveydidnotaskthisquestion.However,recentdiscussionhassuggestedthatacarbontaxmaybeconsideredforsectorsnotcoveredbytheETS,orforcompaniesfallingundertheentrythreshold.
7Fulltextofquestion:“BywhendoyouexpectChinanationalETStobefullyfunctional?e.g.allkeybuildingblocksinplace,including:legislation/law,capandallocationmanagement,completeMRVAsystem,registry,tradingplatforms,marketoversight,etc.”
0%
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2017 2018-2020 2021-2025 Laterthan2025 Never
Industry Non-industry
16
Management of the national ETS
Alargemajorityofrespondents(63%)believethatthelegalbasisforthenationalETSshouldbeaNationalLawpassedbytheNationalPeople’sCongress.Others(32%)believethatregulationbyStateCouncilwouldbesufficient,andveryfewbelieveregulationattheministrylevel(4%)oraministry-issuednotice(1%)wouldsuffice.Theseresultssuggestthatifdedicatedlegislationisnotpossible,attheveryleastthereshouldberegulationprovidedbytheStateCouncilatthebeginningoftheETS.Therewasnosignificantdeviationbetweenindustryandnon-industryrespondentsonthisquestion.
AstronglegalbasisisrequiredforthenationalETS
Figure14Q5-3WhatlegalbasisdoyouthinkisnecessaryforthestartofthenationalETSinorderto
ensurecompliance?(N=255)
1%
4%
32%
63%
MinistryNotice
RegulationatMinistryLevel
RegulationbyStateCouncil
NationalLawbytheNPC
17
Mostrespondents(85%)thinkthatarules-basedflexibilitymechanism,suchasastabilityreserve,isnecessary.8Thiswouldhelptolimitthefluctuationofpricesandtopreventsystemicunderandoversupplyofallowances(hinderingoptimalpriceformation).
Arules-basedflexibilitymechanismisnecessary
Figure15Q5-4Doyouthinkarules-basedflexibilitymechanism,suchasastabilityreservetokeeppricesfromfluctuatingtoomuch,isnecessary?(N=249)
8Arules-basedflexibilitymechanismreferstoamethodformanagingpricesinthecarbontradingsystem.Itcouldtaketheformofamarketstabilityreserve,representingaportionofthetotalpermitsallowedunderthecap,whichcouldbeusedtoinfluencethemarketpriceifpricesexceedcertainpre-definedthresholds.
No12%
Yes88%
Selectedquotes:Doyouthinkarules-basedflexibilitymechanism,suchasastabilityreservetokeeppricesfromfluctuatingtoomuch,isnecessary?Explainyouranswer:
- “Withproperdesign,astabilityreserveisnotnecessary.However,itislikelythatthenationalETSwillfeaturesuchamechanism.Ifoneiscreateditwouldbebestiftheoperatingandtriggermechanismsweretransparentsuchthatparticipantsareneversurprisedbywhenitisimplementednorbytheresultingimpactonthemarket.”–NGO
- “Stateregulationiscrucialintheearlystagesofthecarbonmarket,ascompanieswithamplequotasarenotclearaboutthefuturepolicydirection,andaregenerallyreluctanttosell.Inthefuture,theuncertaintyaroundnationalmacroeconomicchangeswillalsorequireconsiderableadjustmentstobemade.”–Consultancy
18
84%ofrespondentsthinkthatanewentrantsreserveisnecessary.9WhileChina'slevelofeconomicgrowthisslowing,thiswillbeanimportantfeatureinmarketdesigntoaddressnewadditionsincapacity.Atthemicrolevel,newinvestmentandproductionincreaseswillalwaysleadtonewallocationneeds.ThishasbeenwitnessedintheEUforexample,whereSpainrecordedloweconomicgrowth,butSpanishdemandfornewentrants’reserveallocationswashigh.
Initially,anewentrantsreserveisnecessary
Figure16Q5-5DoyouthinkaNewEntrantsReserveisnecessary?(N=243)
9ANewEntrantsReserveconstitutesaspecial-purposepoolofemissionallowancessetasidefornewcompaniesenteringthecarbonmarket,andcompaniesthatincreasecapacity.
No16%
Yes84%
Selectedquotes:DoyouthinkaNewEntrantsReserveisnecessary?Explainyouranswer:
- “Whileitisnotnecessary,itislikelythatanewentrantsreservewillbecreated,allowancesfromwhichwillbeaccessedbynewentrants.”–NGO
- “Enterpriseexpansionandtheestablishmentofnewenterprisesarenecessaryfornormaleconomicdevelopment,andemissionsreductioncannotbeallowedtoinhibiteconomicdevelopment,soitisnecessarytoarrangeareasonableallocationofquotas.”–Academia
- “Besuretocontrolthetotalamount,otherwisesomeonewillseethegreenlight.Redlinesmustnotbeexceeded.”–Sectorassociation
19
AbouthalfoftherespondentsconsiderthattradinginthenationalETSshouldoccuracrossseveralregionalplatforms,while37%thinkthatthereshouldbeonenationalplatform.14%ofrespondentsthinkthatthereshouldbeemissionstradingexchangesineveryprovince.Theseresultssuggestthatforthemajorityofstakeholders,centralisingtradingactivityonacentralplatformisnotasignificantpriority.Theauthorsconsiderthatthismayreflectaprevailingattitudethatsolongassecurityisensured,exchangesareconnectedtotheregistry,andthereisaunifiednationalmarket,companiesarecomfortablechoosingfromarangeoftradingplatforms.
Varyingviewsontradingplatforms
Figure17Q5-6HowmanyemissionstradingexchangesshouldoperateinthenationalETS?(N=253)
Onenationalplatform37%
Severalregionalplatforms
49%
Withinevery
province14%
Selectedquotes:HowmanyemissionstradingexchangesshouldoperateinthenationalETS?Explainyouranswer:
- “InthecontextofthenationalETS,whiletherewillbeoneregistry,theremaybemultipleexchanges.Initially,someofthesewillbeauthorizedtoonlyaccommodatespottransactionswhileotherswillbeallowedtopilotderivativesandriskhedgingproducts.Overtime,theremaybeaconsolidationanditcouldbethatasingleexchangewillemerge.ThoseexchangesthatarenotusedtotransactnationalETSproductswillcontinuetobecentralplayersinthelocalETSprogramsforsolongassuchprogramsexist.”–NGO
- “Itiscertainlybesttointegrateitintoanationalplatform,butinviewofthesignificantdifficultyofhavingoneplatformatthebeginningofthetradingsystem,itisrecommendedtoestablishregionalplatforms,thesameasforthestockmarket.”–Academia
- “Environmentalimpactsarecross-regional,andthedepthofthemarketalsoneedstobecross-regional.Duringtheinitialstage,thereshouldbeafewregionalplatforms,andlatermarketcompetitionshouldbeallowedtoresolvetheissue.”–Non-coveredcompany
20
Themajorityoftherespondents(89%)expectsomelevelofbankingofpermitsfromthepilotsystemstothenationalETSshouldbeallowed.10Respondentsexpectthatcompanieswillbeabletotransferassetsfromthepilotsintothenationalsystemwithouttotallylosingtheirvalue,howeverthereisalsoarecognitionoftheriskoffullbanking,with49%infavourofpartialbanking.Itshouldbenotedthatmorethanhalfofindustryrespondentswerefromcompaniesthathadparticipatedinthepilotmarkets,andthereforelikelytobemoreinfavourofbankingintothenationalsystem.
SomelevelofbankingshouldbeallowedfromthepilotstothenationalETS
Figure18Q5-7HowshouldbankingofpermitsfromthepilotsystemstothenationalETSbemanaged?(N=228)
10Bankingmeanstheholdingofpermitsfromonecomplianceperiodforthepurposeofsaleorsurrenderinafuturecomplianceperiod.
Nobanking11%
Percentageofpermitsmaybebanked49%
Fullbankingofallowances
40%
Selectedquotes:HowshouldbankingofpermitsfromthepilotsystemstothenationalETSbemanaged?Explainyouranswer:
- “Pilotquotasmayhavebeenexcessive,andhavesomelessthanidealaspects.”–Centralgovernment
- “Allpilotregionsareover-allocated.Ifthereisafulltransferitwillbeadisasterforthenationalsystem.”–Carbontradingplatform
- “Howtocarryforwardthesequotaswillbeoneofthebiggestobstaclestotheestablishmentofthenationalcarbonmarket.Sincefullbankingwouldcauseregionalinequity,itisreasonabletocarryoutpartialbankingaccordingtothesituationofeachpilotarea.”–Academia
- “Thepilotscoverdifferentindustriesanddifferentstagesofdevelopment.Bankingshouldbebasedonboththeoverallobjectiveofcarbonemissionsreduction,aswellasinaccordancewiththespecificcircumstances.”–Governmentresearchinstitute
- “Inordertomaintainnationalmarketactivity,itisnecessarytocontrolthebankingofquotas.Butgiventhatenterprisesboresomecostfromcarbontradingduringthepilotstage,partialtransferofthequotasascompensationshouldbeeasytoaccept.”–Powersectormarketparticipant
21
Themajorityofrespondentsbelievethatenterpriselevelreportingwouldbemostefficient(64%).However,asignificantproportionconsiderthatreportingshouldbeconductedatthefacilityorproductlevel(36%).Enterprise-levelreportingwouldprecludebenchmarkingforallocationbyproduct-type.
Ifreportinginvolvesahighlevelofdetail,inprincipleitwillresultindisaggregatedandbetterqualitydatathatcanbeusedforbenchmarking.Benchmarkingisrecognizedasafairincentivetotopperformersbutitisusuallyperceivedasapotentialdisadvantageforthelowestperformers.Lower-levelreportingwouldalsoimplyaheavierreportingburden.Somecompaniesmaybereluctanttotakeonthisburdenwithoutassistancefromgovernment.
Significantlevelofinterestinfacilityandproduct-levelreporting
Figure19Q5-8Whatshouldbethelevelofreporting?(N=247)
Prices in the national ETS
RespondentswereaskedwhattheyexpecttheaveragecarbonpricetobeatdifferentpointsintimeinanationalETSinChina.Theresultsindicateanexpectationofsteadilyrisingprices,butwithsignificantvarianceoverthelevels.
TheaveragepriceexpectationinthenationalETSisCNY38/tin2017;CNY51/tin2018;CNY74/tin2020;CNY108/tin2025.AtthebeginningoftheETS,themajorityofrespondentsexpectthecarbonpricetobebetweenCNY20/tandCNY50/t,similartotheaveragepriceinmostofthepilotmarkets.However,thepricelevelsremainhighlyuncertaininthemoredistantfuture.The20thand80thpercentilesfor2025areCNY50/tandCNY200/trespectively.Thefuturepriceexpectationsaresignificantlyhigherthanatthetimeofthe2015survey.Atthattime,averageexpectationsforthesameyearswereCNY39,CNY45,CNY56andCNY70,respectively;the80thpercentilein2025wasCNY100/t.
37%ofrespondentsprovidednopriceestimates(downfrom43%in2015).Highlevelsofuncertaintymayleadmanyrespondentstobereluctanttoprovideaquantifiedpriceexpectation.
Enterpriselevel64%
Facilitylevel24%
Productlevel12%
22
China’scarbonpriceisexpectedtosteadilyrise
Figure20Q5-9WhatdoyouexpectthepriceinthenationalETStobeinthecomingyears?
(N=161,160,159,157)11
ItisworthnotingthattheexpectedETSpriceisnotanaccurateindicatorofoverallefforttoreducecarbonemissions,becausetheETSiscomplementedbynon-pricingpoliciessuchasmandatoryclosureofinefficientfacilities,incentivesforenergysaving,renewableenergyfeed-intariffs,etc.
Long-termpriceexpectationsvarybetweenindustryandnon-industryrespondents,withindustryexpectinghigherpricesby2020.The2015reportalsodisplayedanindustrytendencytoexpecthigherprices.Thissuggeststhatindustryisconvincedofacertainlevelofcarbonprice,whilesomeexpertsareuncertainifhighpriceswillbeareality.Thismaygivegovernmentextraconfidencethatpolicycertaintyismoreimportantforindustrythanlimitationofcostimpacts.
ForthenationalETS,industryexpectshigherpricesthanotherrespondents
Figure21NationalETSpriceexpectations–industryvs.non-industry.(N=161,160,159,157)
11ForresponsestoQ5-9,theauthorsremovedsomeoutlyingresponses.For2017,fourresponseswereremoved(300,463,500,1000CNY/ton).For2018,threeresponseswereremoved(500,600,2000CNY/ton).For2020,fourresponseswereremoved(529.35,600,1000,2000CNY/ton).For2025,fourresponseswereremoved(595.52,800,2000,20000CNY/ton).Thecriteriaforexclusionwasatleastfivetimestheaveragepriceexpectationforthatyear.
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Readiness for emissions trading
RespondentsfromcoveredindustrywereaskedwhethertheythinkthattheirorganisationisadequatelypreparedtotakepartinanETS.Ofthese41respondents,administratingallowances(44%)andcarbontrading(41%)wereoutlinedastheareasinwhichorganisationswereleastprepared,ashighlightedbyrespondentsthatselectedeither‘notpreparedatall’or‘yes,marginallyprepared’.
Amongrespondents,therewasareasonablelevelofpreparednessformonitoringandreporting(88%)andforallocationdatacollection(71%).Asdescribedintheintroduction,itisworthnotingthatthissurvey’ssamplemaybebiasedtowardsindustryparticipantswithahigherthanaveragelevelofpreparedness.
Selectedquotes:WhatdoyouexpectthepriceinthenationalETStobe–Explainyouranswer:
- “Fosteringmarketstrengthandthegovernment’sapproachtoquotaadjustmentiscritical.Oncethereisamarket,thefactorofgovernmentinterferencewillnotbeinsignificant.Justlikeinthestockmarket,thereisnolegalsupportforascientificapproachtogovernmentallocationofquotas.Governmentnotices,andtheviewswithintheleadershipofvariousdepartments,aredecisiveininterferingwiththerapidgrowthandmaturationofthemarket.”–Constructionsectormarketparticipant
- “Initiallythemarketwillbeover-allocated.Bytheendof2017,pricesmaybelowerthanwiththeinitialtrades…Between2020and2025allsectorsmaybeincluded,andeachnewsectormaycomewithgenerousallocation.By2020derivativesmayhelptocontainprices.Asthecapbites,perhaps2022andlater,pricesmayrise.”–NGO
- “Iestimatethatthecarbonmarketwillflourishinthenextthreeyears.WiththepeakofgreenhousegasemissionsinChinaaround2025-2030,thedemandforcarbonquotasmaydecline.”–Carbontradingexchange
- “Thefirstfewsectorsarebasicallyindustrialenterprises,withhighcostofemissionreduction”(estimatesinitiallyhighanddecliningprice)–Shandongmarketparticipant
- “Earlyinthemarket,youcannotruleoutalotofinvestorstakingagamblingmentality,andthepricecouldeasilyrisetoofast.Later,withmarketregulationinplaceandinvestorstendingtobecomemorerational,thepricewillstabiliseandthenfall.”–Carbontradingexchange
24
Moreworkisneededtopreparecompaniesforcarbontrading
Figure22Q2-1DoyouthinkthatyourorganizationispreparedtoperformtasksunderanETS?(N=41)
Followingonfromthis,respondentswereaskedtoidentifyinwhichareastheyneededtoreceivefurthertrainingbeforethenationalETSstarts.Needsforfurthercapacitybuildingarebroadanddiverse.Themostfrequentlychosenpriorityareasinclude:‘corporatecompliancestrategy’and‘carbonfinance’.Thiscorrelateswellwiththelowerlevelofpreparednessidentifiedaboveforcarbontradingandadministratingallowances.
While88%ofindustryrespondentsfeltpreparedformonitoringandreportingand71%forallocationdatacollection,32%and27%ofrespondentsalsoclaimedaneedfortrainingintheseareas.Thissuggeststhateveninareaswherecompaniesarebestprepared,thereissignificantneedforadditionaltraining.
Capacitybuildingisneededinmanyaspects
Figure23Q2-2InwhichareasdoyouneedtoreceivefurthertrainingbeforethenationalETSstarts?(Selectupto3)(N=41)
39%
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Yes,strongly Yes,moderately Yes,marginally Notpreparedatall
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25
The41industryrespondentswereaskedwhethertheyhadformulatedadedicatedteamtohandleETSobligations.76%ofrespondentshaddedicatedeitheranindividualorateam.Teamsrangedinsizeofupto30persons,withtheaverageteamconsistingof8people.15companieshadsmallteams(1-4people),9hadmoderatelysizedteams(5-10people),while6hadlargeteams(>10people).
MostcompanieshaveformedateamtohandleETSobligations
Figure24Q2-3Hasyourcompanyassignedadedicatedperson(internalorexternal)orformedadedicatedteamtohandleyourETSobligations?(N=41)
Oftheseteams,mostwerecomprisedofeitherdecision-makingteamsfromdifferentdepartments(45%)orhadadedicateddepartment(42%).Only13%ofrespondentshadoutsourcedtoanindependentcompany.
CompanieshavedifferentapproachestoensuringcompliancewithETSobligations
Figure25Q2-3Whatisyourteam’sorganizationalform?(N=41)
No,24%
Yes,76%
Teamfromdifferent
departments45%
Department42%
Independentcompany13%
26
Ofthe41industryrespondents,33(80%)ofthemhavealreadybegunparticipationintraining.ThissuggestsextremelyhighlevelsofconfidencethatthenationalETSwillbeimplementedintheverynearfuture.
AlargemajorityofindustryorganisationshavealreadyparticipatedinETStraining
Figure26Q2-4Hasyourcompanyparticipatedintraining(s)onETS?(N=41)
Ofthe33respondentsthathavealreadyparticipatedinETStraining,amajority(52%)ofthemproducedover1,000,000TCE/year.
Figure27Companiesthathaveparticipatedintraining(s)onETS,bylevelofemissions(unit:tonsofcoalequivalentperyear)(N=41)
No20%
Yes80%
Below5,0006%
10,000-100,00015%
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27%
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27
Ofthe41ETS-coveredcompanies,80%ofrespondents(33respondents)statethattheyhavesetanemissionreductiontarget.Thisissimilartotheresponseratein2015,howeverwithahighernumberofresponses.Thisisanextremelypromisingfigure,andsuggeststhatformanycompanies,ETSisusedasadriverforchange,and/ortheywanttobefullypreparedforitsimplementation.
Itisnotablethat39%ofrespondents’companieshaveundertakeninternaldistributionofallowancesbetweensubsidiarycompanies,whetheritbeanintra-companyexchangeofallowancesviaatradingdesk(17%),oranallocationofallowancesbyheadquarters(22%).
31%ofrespondentshaveimplementedaninternal/shadowcarbonprice.Thispercentageisexpectedtoincreaseovertime.PricesrangedfromCNY20toCNY670,withthelowerpricesseemingtomirrorcurrentspotprices,andthehigherpricesseenashavingthepotentialtodrivefurtherlowcarboninvestmentdecisions.
Impacts of carbon pricing on investment Respondentswereaskediftheyexpectedthepriceofcarbontoaffectinvestmentdecisionsin2017,2020,and2025.Respondentsexpectcarbonpricingtoincreasinglyaffectinvestmentdecisionsinthecomingyears.In2017,39%ofthosewhoexpressedaview,expectinvestmentdecisionstobestronglyormoderatelyaffected.By2025,thisnumberrisesto84%ofrespondents.Only2%ofrespondentswhoansweredthisquestionexpectinvestmentdecisionstobeunaffectedby2025.Theresponsesalsodemonstratealevelofuncertaintyforthemedium-term,withsignificantlylessrespondentsexpectingastrongimpactin2020thanforthe2015survey(17%downfrom30%).
Carbonemissionstradingisexpectedtoincreasinglyaffectinvestmentdecisions
Figure28Q3-1DoyouexpecttheETSinChinatoaffectinvestmentdecisionsin2017?2020?2025?(N=252,246,231)
11%17%
46%28%
60%
38%43%
20%13%18%
3% 2%
2017 2020 2025
No
Yes,marginally
Yes,moderately
Yes,strongly
28
Selectedquotes:Doyouexpectthepriceofcarbontoaffectinvestmentdecisions?Why?
Estimateincreasing/strongtrendinimpact:
- “Becauseclimatewarmingwillbecomemoreandmoreserious,thecontrolofCO2emissionswillbecomemoreandmoreimportant.”–Non-coveredcompany
- “Onlywhenbusinesscostsincreasewillithaveanimpactoncorporateinvestmentdecisions.Myforecastisbasedonafutureincreaseintheproportionofallowancesthatwillbeauctioned[asopposedtofreeallocationtoday].”–Consultancy
- “Environmentalproblemsneedacombinedeffort.Themarket-orientedwayofsocialgrowthwillnotchangesoon,andclimatechangeisimminent.Inaddition,thecarbonmarketindustryismatureenough,soitwillinevitablygenerateastrongconstraintinthenext3to5years.”–Non-coveredcompany
- “In2017,awarenessofcarbontradingwillstillbespreadinggraduallytostakeholdersacrossthecountry.By2020,theETSknowledgeandinfrastructurewillbeinplace,andcompanieswillbeawareoftheimpactofcarbonemissionsattheenterpriselevel.By2025,withthenationalpoliciesonenvironmentalprotectionandenergyconservationforenterprisesfurthertightening,carbonemissionswillhaveagreaterimpactoncompanies.”–Consultancy
- “Thecarbonemissionstradingsystemisnotyetperfected,andtheimpactoninvestmentdecisionsisrelativelysmall.Withimprovementovertime,theimpactofthesystemoninvestmentdecisionswillincrease.”–Academia
- “Therewillbeatransitionperiodbecausetherewillbefewenterprisesincludedattheearlystageofthemarket,thepolicyframeworkisstillbeingperfected,andthereislessexperience.Thiswillbefollowedbymorestringentrequirementsonenterprises,sotheimpactoninvestmentwillbecomelarger.”–Consultancy
- “Ihaveanoptimisticoutlookforthecarbontradingsystem.Theestablishmentofthenationalmarketin2017isboundtoimpactoninvestmentdecisionsthisyear,whileexperiencefromthepilotssuggeststheyhavehadamoderateinfluenceonenterprises’investmentdecisions.Whenthecarbonmarketgraduallydevelops,isrefinedandmatures,investmentdecisionswillbecloselyrelatedtothecarbontradingsystem.Ibelievethatinvestmentin2020willbesignificantlyaffected.”–Academia
Estimateminimal/uncertainimpact:
- “Policyandtechnicalindicatorsarenotclearandarenotdirectlylinkedtothescopeofmarketactivity.Theapplicationofcleanerproductionandtheimpactofzero-carbonenergymaynotbetransferredtotherelevantbusinessareas.”–Non-coveredcompany
- “Investmentinstitutionsaretakingawait-and-seeattitudetoChina’scarbonmarket,andwillgraduallyhaveanincreasingeffectoninvestmentdecisionsoverthenextthreeyears.ButitisdifficulttopredictthedevelopmentofChina'scarbonmarketin2025.”–Carbontradingexchange
- “Firstly,thecoverageisnarrow;secondly,theinternationalsituationwillmakecarbonmarkethaveinsufficientprofitability.”–Chinalocalgovernment
- “Thegovernmentisnotstrongenough,theeconomicsituationisnotgoodenough,thepolicyisnotclearenough.”–Consultancy
29
Carbon pricing in context
RespondentswereaskedwhattheyexpectwillbethemostimportantpoliciestoreduceGHGemissionsinChinaatdifferentpointsintime(Figure3).Fromnowuntil2025,thecombinedexpectationofrespondentsisthattheemphasiswillclearlyshifttowardscarbonemissionstrading,environmentaltax,environmentalinformationdisclosureandenergyallowancestrading.12Thisreflectsashiftawayfromapproachessuchasthemandatoryclosureofinefficientfacilities,tobereplacedbyasuiteofmoremarket-orientedpolicies.Atthesametime,respondentsstillpredictasituationwherethereisamixofpoliciesinthelongrun.
Interestingly,ETSisalreadyseenasamotivatorforGHGreductionin2017,suggestingthatthepolicycanhaveapositiveimpactevenifthecarbonpricesignalisnotyetatahighlevel.
Market-orientedpolicyinstrumentsareexpectedtobecomemoreimportantovertime
Figure29Q3-3Whichdoyouexpecttobethemostimportantpoliciesinmotivatingcompaniesto
reduceGHGemissionsinChinaatdifferentpointsintime?(Selectupto3foreachyear)(N=256,253,257)
12EnergyallowancestradingisanewpolicyintroducedbytheChinesegovernment,firstinfourpilotregionstobeexpandednationallyifsuccessful.Itwillallocateenergy-consumptionquotastocompanies,whowillhavetoeliminateoutdatedcapacityorbuyextraquotasiftheyexceedthelimit.
25% 26% 27%
8%16%
21%10%
13%
14%
6%
10%
13%
13%
12%
8%
17%
11%6%
21%13% 11%
2017 2020 2025
Mandatoryclosureofinefficientfacilities
Energyconservationsubsidies
Renewablefeed-intariffs
Energyallowancestrading
Environmentalinformationdisclosure
Environmentaltax
ETS
30
Linking China’s national ETS with other systems
Inprinciple,ETSsindifferentjurisdictionscanbelinkedwitheachother,bymakingpermitsfromonesystemeligibleinanother.Barringanyrestrictionsonpermittrade,thiswouldresultinthesamepriceapplyinginthelinkedETS’s,andincross-borderfinancialflowsforpermits.Advantagesaregreateroverallcosteffectiveness,becauseofharmonisationofmarginalmitigationcosts;beingabletodifferentiatetargetsbetweenjurisdictionswithoutsacrificingcosteffectiveness;andgreatermarketdepth.Butlinkingrequiresharmonisationofrules,mutualacceptanceofthesystemcaps,permitsissuance,andreliableemissionsaccountingandenforcementinallparticipatingjurisdictions.
RespondentswereaskediftheyexpectChina’snationalETStobelinkedwithexistingETS’saroundtheworldby2025,by2030,orafter2030.Someexpectinternationallinkingby2025(31%),andamajority(61%)expectlinkingwilloccurby2030.Whilethisreflectsthefactthataboutonethirdofstakeholdersremainoptimisticofinternationallinkingintheshort-to-mediumterm,twothirdsseeitasalonger-termproposition,ifatall.Theexpectationsforlinkingby2025areslightlymoreoptimisticthaninthe2015survey(upfrom27%),butnotasoptimisticasthe2013survey(downfrom69%).Expectationsfor2030arealsohigherthantheywerein2015(60%upfrom52%).Thissuggeststhattherewasadipinconfidencearound2015,thatmayhaveinpartbeencounteractedbythemomentumoftheParisAgreementandongoingworktolinkcarbonmarketsinNorthAmerica.
Selectedquotes:WhichdoyouexpecttobethemostimportantpoliciesinmotivatingcompaniestoreduceGHGemissionsinChinain2017/2020/2025?Others–pleasespecify:
- “Thedevelopmentofrenewableenergycompaniesshouldbesupportedbypoliciesandsubsidies,ifnecessary.Firstly,somepollutingenterprisesshouldbeclosedandthenascientificapproachtocontrollingpollutionandprotectingtheenvironmentshouldbeestablished.Forexample,ourcompanyisastart-upandfacesdifficultiesdevelopinginthecurrentsystem.Weparticularlyneedpolicysupporttodevelopthecompanyandpreventforgedandfaketechnology.”–Non-coveredcompany
- “Subsidiescanreducecarbonemissionintheshortterm,whileinformationdisclosurecanhavealong-terminfluence.Thisinfluencewillbestrong,butnotnecessarilyseenintheshortterm.”–Multilateralorganisation
- “Offeringsubsidiesisashort-termapproach,whileinthelongtermthereisaneedtoestablishmarketnorms.”–Consultancy
- “Institutionaldevelopmentisthefoundation.Intheshort-termstrongcontrolsshouldbeimplemented.”–Financialsector
31
AmajorityexpectsthatChinawillbelinkedwithothersystemsby2030
Figure30Q6-3DoyouexpectthatChina’snationalETSwillbelinkedwithanyothersystemsbytheyear2025or2030?(N=260)
Ofthoseexpectinginternationallinkages,84%expectalinkwiththeEUETS(65%overall),whilesignificantminoritiesforeseelinkageswiththeRegionalGreenhouseGasInitiative(RGGI)intheUnitedStates,SouthKoreaandCalifornia.
TheEUETSisseenasthemostlikelycarbonmarketforlinkingwithChina
Figure31Q6-3IfYes,whichones?(N=201)
0%
20%
40%
60%
80%
100%
Yes,by2025 Yes,by2030 After2030 Never
%ateachmilestoneyear Cumulative%ofLinking
0% 10% 20% 30% 40% 50% 60% 70%
EU
RGGI
SouthKorea
California
NewZealand
Québec
Kazakhstan
Alberta
Other
32
China’s national emissions targets and peak emissions
In2009Chinasetanationaltargetfor2020foremissionsintensity(CO2emissionsperunitofGDP).Thegoalistoreduceemissionsintensityby40to45%over2005.Anintensitytargetmeansthattheabsoluteamountof“allowable”emissionsincreasesifGDPishigher,anddecreasesifGDPislower.InJune2015,Chinaannouncedafurthertargettoreduceemissionsintensityby60to65%by2030(againcomparedto2005levels).
Respondentswereaskedwhatformoftargettheyexpecttoapplyin2025and2030,ifany.WhilethemajoritythinksthatChinawillsticktoanemissionsintensitytargetfor2025(63%),theshareofrespondentsthatexpectanabsolutetargetbythatyearhasdoubledsince2015(34%upfrom17%).Expectationsfora2030absolutetargetremainat65%,thesameasin2015.ItseemsthatthereisagrowingconsensusthatChinamayupgradeitscurrentemissionsintensitycommitmenttoanabsolutetargetincomingyears.
Absolutetargetexpectedfor2030
Figure32Q6-2DoyouexpectthatChinawilltakeonanemissionstargetfor2025/2030;ifsowhat
type?(N=248,242)
34%
65%
63%
34%
2% 1%
2025 2030
Notarget
Intensitytarget
Absolutetarget
Selectedquotes:DoyouexpectthatChinawilltakeonaGHGemissionstargetfor2025[2030]and,ifso,whattype?Explainyouranswer:
- “Chinaisadevelopingcountrywithhighenergyconsumption,andcarbonemissionaredifficulttoreducesignificantlyinashortperiod.SothebestwayistosetagoalthatcanmeetChina’sspecificnationalconditionsregardingemissionsreduction.”–Centralgovernment
- “Pre-2025,theremaybeabottom-up,intensity-derivedcapwhichistheresultofthesummationofemissions,thenallocation,thatareassociatedwitheachenterpriseand,byextension,eachprovince.Post2025,theremaybeanabsolutecap.Again,thismaybebottomupbutmayalsoreflectmandatedreductions.”-NGO
33
Chinacommittedtopeakitsabsolutegreenhousegasemissionsby2030orearlieraspartofitscommitmentstotheParisAgreement.90%ofrespondentsexpectChinatoachievethecarbonemissionspeakby2030(upfrom82%in2015),and55%expectChina’semissionstopeakby2025orearlier(upfrom39%).8%ofrespondentsarenowoftheviewthatChina’sCO2emissionshaveinfactalreadypeaked.
China’semissionsareexpectedtopeakaheadof2030
Figure33Q6-1WhendoyouexpectChina’semissionswillpeak?(N=259)
8%
17%
31%
35%
10%
Alreadypeaked Before2020 2021-2025 2026– 2030 After2030
Selectedquotes:HowdoyouexpecttheParisAgreementwillaffectprogressoncarbonpricing?
- “IftheUSPresidentinsistsonfailingtofulfiltheParisAgreement,thenitwillbedifficulttohavearisingcarbonprice.”–Chinanationalgovernment
- “TheParisAgreementisaloose,bottom-upagreement.TheexpectedeffectwilldependonthedeterminationoftheTrumpgovernment.Otherwiseitwouldhavelittleimpactontheinternationalcarbonprice.”–Academia
- “Itwillonlyincreasethenumberofpeoplewhoareconcerned.Andthenthepricewillcontinuetogodown.”–Carbontradingexchange
- “AccordingtotheParisagreement,China'scommitmenttothetaskofreducingemissionswillbecomeincreasinglyheavy.So,thecarbonpricewillbecomehigherandhigher.”–Academia
- “Withtheinternationalpoliticalandeconomicsituationchanging,therecognitionofenvironmentalfactorswillbeweakened.”–Steelsectormarketparticipant
- “Itwillservetoencouragecountriestotakeontargetsandimplementprogramsthatencouragecarbonreductions.”–NGO
- “Itwillprovideamorecredible(butalsomoretedious)regulatoryframeworkforcountriesthatwouldbegoingformarketswithorwithoutParis.”–Media
34
Appendix 1: Key policies issued for the pilots in 2016-17
ShenzhenOnSep18th,2016,Shenzhenreleasedanoticeonemissiontradinginthe2016compliancecycle.824entitieswerecovered,246morethanin2015.
Beijing
OnApr28th,2016,Beijingreleasedthethirdbatchofcarbonemissionintensitybenchmarks,intendedtofacilitateallowancecalculation.
OnSep18th,2016,Beijingdisclosedthelistofcoveredentitiesfortheyear2016,including947companies.
Shanghai
OnFeb4th,2016,Shanghaireleasedthelistofcoveredentitiesfortheyear2016.Thetotalnumbercoveredreached310.Thewatertransportsectorwascoveredforthefirsttime.
ShanghaisuspendedtradingfromJun30toNov17of2016totransitionallowanceswith2013-2015vintagetocurrentallowances.
OnNov11thof2016,Shanghaiissuedtheallocationplanfor2016,withacapof155milliontons.
Guangdong
OnJul8th,2016,Guangdongpublishedtheallocationplansforpreviouslycoveredsectorsincludingpower,ironandsteel,petrochemicals,andnormalcement.OnJun6th,2017,allocationplansforaviation,papermaking,andwhitecementwerealsoissued.Thus,thecapforGuangdongin2016reached422milliontons,covering280entities.
TianjinOnMar21stof2016,TianjinissuedtheInterimAdministrationMeasuresonEmissionsTradingforTianjin,whichtookeffectonJun1stof2016.
Hubei
OnJul12th,2016,HubeireleasedanoticetoexertmorerestrictionsontheuseofCCERs,aimingtomitigatetheimpactofCCERsontheallowanceprice.
OnJan4th,2017,Hubeiissuedanallocationplanforthe2016complianceyear,withacapof253milliontonsand236coveredentities.
ChongqingOnNov11th,2016,Chongqingurgedcoveredentitiestoreportemissionsandapplyforallowancesfor201613.Basedonthereport,100milliontonsofallowanceswereissuedtocoveredentitiesonJan18,2017.
TableA-1Keypoliciesissuedforthecarbontradingpilotsin2016-17.
13Unlikeotherpilots,allowancesinChongqingwereallocatedbasedonemissionreportandapplicationsbyentities,insteadofbycalculation.
35
Appendix 2: CCER trading to-date AsofSeptember30th,2017,2,871CertifiedEmissionReduction(CCER)projectshadbeenpublicizedforreviewand1,047hadbeenregistered(287ofwhichhadbeenissued).Amongthoseissued,thecertificationreportsfor254(representing52.94milliontonsofCCERs)arepublicallyavailable.In2016alone,1,505projectswerepublicizedforcomment,611wereregistered,and196wereissued(FigureA-1).
FigureA-1NumberofCCERprojects.
AsofSeptember30th,2017,287CertifiedEmissionReduction(CCER)projectshadbeenissued.Amongthoseissued,thecertificationreportsfor254(representing52.94milliontonsofCCERs)arepublicallyavailable.Ofthese,139areTypeI(18.9milliontonsofCCERsissued),17areTypeII(3.7milliontCO2e),and98areTypeIII(30.3milliontCO2e).14Inaddition,wind,small-scalehydro,solarPVandhouseholdbiogasprojectsaremostpopular,dueinparttotheoffsetrulesforCCERsinthepilotcarbonmarkets.ThedetailsaredisplayedinFiguresA-2andA-3.
Wind Hydro SolarPV
Householdbiogas
Total
Totalprojects
90 32 48 41 254
MillionsoftCO2e
12.5 13.4 2.7 6.3 52.9
TableA-2PubliclydetailedCCERprojects,asofSeptember30th2017.
14AccordingtoregulationonthemanagementandoperationofCCERprojectsissuedbytheNDRC,therearefourcategoriesofCCERprojects.Category1referstonewlydevelopedCCERprojects.Category2referstothoseprojectswhichgetaLetterofApprovalfromtheDesignatedNationalAuthoritybutarenotyetregisteredwiththeCDMExecutiveBoard.Category3referstothoseregisteredCDMprojectsapplyingforissuanceofemissionsreductionsgeneratedbeforethedateofregistration,knownasPre-CDMprojects.Category4referstothoseregisteredCDMprojectsforwhichtheCDMExecutiveBoardhasnotissuedanyemissionsreductions.
1234
43691
1505
611
196
ProjectReview Registered Issued
Before2016 2016
36
FigureA-2CCERprojectsbytype(numberofprojectsissued)
FigureA-3CCERprojectsbytype(milliontonsofcreditsissued)
123.7milliontonshadbeentradedbySeptember2017.In2016alone,thetradingvolumewas42.5milliontons,increasingby27.3%comparedwith2015.BetweenJanuaryandSeptemberof2017,42.77millionweretraded,approachingthelevelof2016(FigureA-4).
OnlyBeijingandShanghaireleasedonlinetradingprices.ThepricerangesforBeijingandShanghaiwereCNY10-20/tonandCNY20-25/tonrespectively.
Wind,90
SolarPV,48
Householdbiogas,41 Hydro,32
Biomassgeneration,15
CMMpower,5
Naturalgaspower,4
Wasteheatpower,4
Cogeneration,1
Forests,1
Other,13Other,43
Wind,12
SolarPV,3
Householdbiogas,6
Hydro,13
Biomassgeneration,3
CMMpower,2
Naturalgaspower,6
Wasteheatpower,4
Other,3
Other,1803
37
FigureA-4CCERtradingvolume(milliontons)
33.7
42.5
39.2
2015 2016 2017(Jan-Sep)
38
Appendix 3: Status of the national ETS design
Tasks Currentstatus Keytasksfor2ndhalfof2017andbeyond
LegislationThedraftETSregulationhasbeensubmittedtotheStateCouncil,andtheLegislativeAffairsOfficeundertheStateCouncilisworkingonitaccordingtoitsworkingprocedures.
• WorkcloselywithLegislativeAffairsOfficetopasstheRegulationbeforelaunchofnationalETS
• Releaseadministrativemeasuresfor:Third-partyVerificationAgencies;GHGEmissionReporting;andforCarbonTrading
Monitoring,reporting&verification
GuidelinesforGHGaccountingandreportingfor24sectorshavebeenreleased.ProvincialDRCshaveselectedaround100third-partyverifierstoconductverificationofhistoricalemissions.
• Unifystepbystepqualificationmanagementandsupervisionofthird-partyverifiersthroughassessmentandclearlydefinedrequirements
• Upgradeandoptimizeguidelinesforcertainsectors
• Conductthird-partyverificationfor2016emissions
Capsetting&allocation
TheStateCouncilapprovedthenationalallocationplaninlate2016.Inaddition,NDRChasconductedtrialallowancecalculationfor3sectors(power,cementandaluminium)inSichuanandJiangsu.
• Issuemethodologiesandoperationmanualsforallowanceallocationinrelevantsectors
• Releasenationalallocationplanandrelatedoperationmanuals
• Organizecapacitybuildingonallocation
Tradingplatform
EstablishtradingplatformforthenationalETSbasedonplatformsofthesevenpilots,plusSichuanandFujian.
• Assesscurrenttradingplatforms
• Developadministrationrulesforthetradingplatforms
• Designandbuildacommontradingsystemforthetradingplatforms
Registrysystem
Softwareofthenationalregistrydeveloped.
Feasibilitystudyofthenationalregistrysystemhasbeenconducted.
• Constructandconsolidateaunifiedprimaryandback-upsystems
• Decideandselecttheoperationalentityoftheregistrysystem
Offsetmechanism
CCERprojectregistrationandcreditissuancehasbeensuspended.AdministrationrulesforoffsetmechanisminthenationalETShavebeenresearched.
• ReviseCCERmanagementmeasures
• Formulateoffsettingrulesforcompliancepurposes
Transitionofpilots
NDRCandthepilotshaveresearchedtheplannedtransition. • Designareasonableplanfortransitionofallowances
39
Appendix 4: Survey questions and aggregated responses Section1:Respondents’background
Q1-1:Whereisyourorganizationlocated?
Responses Percentage
InmainlandChina 239 92%
OutsideofmainlandChina 21 8%
Q1-2:Howwouldyouclassifyyourorganization?
Responses Percentage
Companycovered,ortobecovered,byETS 41 16%
CompanynotcoveredbyETS 26 10%
Industrysectoralassociation 7 3%
Chinanationalgovernment 6 2%
Chinalocalgovernment 7 3%
Academia 25 10%
Governmentresearchinstitute 13 5%
Emissionstradingexchange 17 7%
Financialsector 18 7%
Consultancy 65 25%
Legalservices 0 -
NGO 15 6%
Multilateralorbilateraldevelopmentorg. 2 1%
Foreigngovernmentorembassy 1 <1%
Other 17 7%
Q1-3:WillyourcompanyoperateunderthenationalETS?[onlyforindustryrespondents]
Responses Percentage
Yes 34 83%
No 2 5%
Don’tknow 5 12%
IfYESorDon’tknow,pleasespecifythesector:
Responses Percentage
Petrochemicals
(incl.crudeoilprocessing,ethylene)
6 15%
Chemicals
(incl.calciumcarbide,ammoniasynthesis,methanol)
8 21%
Buildingmaterials
(incl.cement,ceramics,clinker,plateglass)
1 3%
Iron&Steel 5 13%
Non-ferrousmetals 1 3%
Pulpandpaper 3 8%
Electricitygeneration 10 26%
Aviation 5 13%
Thisfirstpartofthesurveyaimstoidentifyrespondents’profile.
40
Q1-4:IsyourcompanycurrentlyoperatingunderanemissionstradingsysteminChina?[onlyforindustry
respondents]
Responses Percentage
Yes 24 59%
No 17 41%
IfYES,whichofthefollowing(chooseoneormore)?
Responses Percentage*
Beijing 10 42%
Shanghai 7 29%
Tianjin 8 33%
Hubei 7 29%
Guangdong 10 42%
Chongqing 4 17%
Shenzhen 4 17%
*shareofcompaniescoveredbypilots,notoftotalresponses,assomerespondentschosemultiple
systems.
IfYES,pleasespecifythesector:
Responses Percentage*
Petrochemicals(incl.Crudeoil
processing,ethylene)
5 21%
Chemicals(incl.Calciumcarbide,
ammoniasynthesis,methanol)
5 21%
Buildingmaterials(incl.cement,
ceramics,clinker,plateglass)
1 4%
Iron&Steel 2 8%
Non-ferrousmetals 0 -
Pulpandpaper 1 4%
Electricitygeneration 9 38%
Aviation 2 8%
Automotive 0 -
Oil&gasextraction 0 -
Textile 0 -
Transportation 0 -
Buildings(e.g.,residential,gov.
buildings)
0 -
Other 1 4%
“Other”included:Carbondevelopment
*shareofcompaniescovered,notoftotalresponses,assomerespondentschosemultipleoptions.
Q1-5:Pleasespecifytheenterprisetype[onlyforindustryrespondents]
Responses Percentage
CentralGovernment-ledStateOwned 13 34%
LocalGovernment-ledStateOwned 12 17%
Private 3 29%
Foreigninvestment 7 5%
Jointventure 3 7%
Other 2 7%
“Other”included:“Intheprocessoftransferringequity”;Unspecified
41
Q1-6:HowmuchenergydoesyourcompanyannuallyconsumeinChina?(Note:underonelegalentity)
[onlyforindustryrespondents]
Responses Percentage
Lessthan5,000tce/year 2 5%
5,000~10,000tce/year 2 5%
10,000~100,000tce/year 9 22%
100,000~1,000,000tce/year 9 22%
Morethan1,000,000tce/year 19 46%
Q1-7:IsyourorganizationcurrentlyoperatingunderanemissionstradingsystemoutsideofChina?
[onlyforindustryrespondents]
Responses Percentage
Yes 11 27%
No 30 73%
IfYES,where?
Responses Percentage
EUETS 9 82%
CaliforniaETS 1 9%
QuébecETS 0 -
AlbertaETS 0 -
SouthKoreaETS 0 -
NewZealandETS 0 -
KazakhstanETS 0 -
RegionalGreenhouseGasInitiative 0 -
Other 0 -
Noresponse 1 9%
Q1-8:Inthemanagementstructureofyourcompany,whatpositiondoyouhold?[onlyforindustry
respondents]
Responses Percentage
Juniorstaff 18 44%
Mid-levelmanager 20 49%
Seniorexecutive 2 2%
Other 1 5%
“Other”included:EnvironmentalCommissioner
Section2:Currentcapacityandlevelofreadiness[onlyforindustryrespondents]
Q2-1:DoyouthinkthatyourcompanyispreparedtoperformtasksunderanETSinthefollowingareas?
Monitoringand
reporting
Allocationdata
collection
Administrating
allowances Carbontrading
Notpreparedatall 1 4 4 5
Yes,marginally 20 13 10 14
Yes,moderately 4 8 14 12
Yes,strongly 16 16 12 10
Don’tknow 0 0 1 0
Thissectionaimstounderstandthecurrentcapacityandthelevelofreadinessofcompaniestotake
partinanemissionstradingsystem.
42
Q2-2:Inwhichareasdoyouneedtoreceivefurthertraining?(Chooseupto3areasyouwouldliketo
receivetrainingsbeforethenationalETSstarts)
Responses Percentage*
Keyfeaturesofemissiontradingandcarbonmarkets 15 37%
Monitoringandreportinggreenhousegasemissions 13 32%
Verificationandaccreditation 3 7%
Corporatelevelorganizationandcompliancestrategy 20 49%
UseofETSregistry 3 7%
Datacollectionforallocation 11 27%
Legalframework/regulations 12 29%
Carbonfinance 18 44%
DevelopmentanduseofCCERs 11 27%
*shareofcompaniescovered,notoftotalresponses,assomerespondentschosemultipleoptions.
Q2-3:Hasyourcompanyassignedadedicatedperson(internalorexternal)orformedadedicatedteamto
handleyourETSobligations?
Responses Percentage
Yes 31 76%
No 10 24%
IfYES:Howmanypeopleareintheteam?
Responses Responses
1 1 9 1
2 2 10 2
3 8 12 1
4 4 15 1
5 3 16 1
6 2 20 1
8 1 30 2
Noresponse 1
IfYES:Whatisyourteam’sorganizationalform?
Responses Percentage*
Independentcompany 4 13%
Department 13 42%
Decisionmakingteamfrom
differentdepartments
14 45%
*shareofcompanieswithdedicatedperson/team.
IfYES:Whatarethecompetenciesoftheperson(s)youhaveassignedtohandletheETSobligations?
Responses Percentage*
Financial 5 16%
Processengineer 14 45%
Management 24 77%
Other 4 13%
*shareofcompanieswithdedicatedperson/team,notoftotalresponses,assomerespondentschose
multipleoptions.
43
Q2-4:Hasyourcompanyparticipatedintraining(s)onETS?
Responses Percentage
Yes 33 80%
No 8 20%
IfYES:Whichdepartment/levelrepresentedyourcompanyinthetraining(s)?
Answersincluded:ProductionTechnologyDepartment(4);CarbonAssetDepartment;Factoryorenergy
department;EnergyandEnvironment;Business;DepartmentManager;ParentGroup;Safetyand
EnvironmentalProtection;Finance;Highandmiddlelevelsbothparticipated;VicePresident;Employee;
Multipledepartments;Department-level;Self-training;EnergyandAuthorities;MiddleManagement;
ProductionManagementDepartment;Strategy;AdministrationDepartment.
IfYES:Fromwhichagencydidyourcompanyreceivetraining?
Answersincluded:SinoCarbon(5);ICF;ICIS(2);DevelopmentandReformCommission–Unspecified(3);
NationalDevelopmentandReformCommission;BeijingMunicipalDRC;TianjinDRC;GuangdongProvincial
DRC;ProvincialDRC;Localgovernment;Citygovernment;BeijingEnvironmentalExchange;Hubei
Exchange;GuangdongCarbonExchange(2);Tradingexchanges–Unspecified(2);CarbonCast;Steel
Association(2);NitrogenFertilizerIndustryAssociation;Sectoralassociation;StateCouncilPolicyResearch
PhaseII;InternationalCooperationProject;GIZ;GuangdongCapacityBuildingCenter;StraitTrading
Center;CivilAviationUniversityofChina;PreparatoryGroupofCarbonEmissionsTradingManagement
Center;Groupinternalcarbonmanagementcompany;EnvironmentalProtectionScienceResearch
Institute;Self-training;.
Q2-5:HasyourcompanyformulatedacompliancestrategyforETSinChina?
Responses Percentage
Yes 25 61%
No 16 39%
IfYES:Summarisethestrategyhere(optional)
Answersincluded:
Ensurecomplianceandthesecurityoftrading;
Duringthepilotphase,conductinternaltransactions;duringthenationalmarketstage,gradually
participateinthemarket;
ThroughthedeploymentofCCERs,carryouttrusteeshipbusinesstoreduceperformancecosts;
Accordingtothemarketprice,aswellasthecompany’sproductionandoperations,activelycomply,and
strivetoachieveefficiency.
Q2-6:DoesthetransitionfrompilottonationalETSrequiresomeadjustmenttoyourstrategyand/or
organizationalstructure?
Responses Percentage
Yes 21 51%
No 20 49%
IfYES:Ifso,how?(optional)
Answersincluded:
Mayestablishanindependentdepartment.
Setupaprofessionalcompany.
Establishprofessionalinstitutions,fosterandorganizeknowledgetransfertohelppersonnelworkingon
trading,informationcollection,development,andfinancialaspectsofthecarbonmarket.Currently,we
arecloselywatchingthedevelopmentofthemarket.
44
Developatradingmechanism,participateinthemarketasappropriate,andestablishacomprehensive
operationalmanagementmodelforthegroup’scarbonassets.
Establishsystemsandresponsibleorganizations.
Establishacarbontradingdecision-makingteam;setupmanagementproceduresthatarelegally
compliant,convenientandefficient.
Needtoorganizeaspecialisedgrouptostudythetradingsituation;increaseR&Dandinvestmentin
technology,inordertoreducethelevelofemissions.
Q2-7:Doesyourcompanyhaveanemissionsreductiontarget?
Responses Percentage
Yes 33 80%
No 8 20%
Q2-8:Hasyourcompanyundertakeninternaldistributionofallowancesbetweensubsidiarycompanies?
Responses Percentage
Yes,intra-companyexchangeof
allowancesviaatradingdesk
7 17%
Yes,re-allocationofallowances
byheadquarters
9 22%
No 21 51%
Don’tknow 4 10%
Q2-9:Doyouhaveaninternal/shadowcarbonprice?
Note:ashadowpriceisanassumedfuturepriceofcarbonemissions,whichisfactoredintoinvestment
andoperationaldecisions.
Responses Percentage
Yes 12 31%
No 27 69%
IfYES:Whatvalueisit?
15-20;20;40;50;60;50-100;Theproductionprocessofeachsubsidiaryisdifferent.Thecarbonprice
rangesfrom300-670.
Q2-10:Haveyouconductedinternalmonitoringandreportingofyourcompany’sGHGemissionsaheadof
thestartofChinaETSpilots?
Responses Percentage
Yes 23 42.5%
No 17 57.5%
IfYES:Whattypeofproblemswereencountered?(optional)
Answersincluded:
Notime.
Policyinstabilityandlackofsecurity,resultinginnotbeingabletomeettheobjectives.Thereisconfusion
betweenthevariousgovernmentdepartmentsinvolved.Inourunderstanding,exceptfortheprofessional
institutions,manydepartmentsinvolvedhavegapsandtakeanold-fashionedapproachtonationalpolicy.
Thishasaveryharmfulimpactontheapprovalofeachlinkinthedevelopmentofcarbontrading.
Problemwithstatisticalrequirements.
Internaltrainingonnewaspectsshouldbestrengthened.
Wejuststartedlastyear.Wearenotfamiliarwiththepolicyandneedfurtherunderstandingofthe
principlesofquotaallocation.
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Q2-11:WhatotherpreparationsareneededinordertobereadyforparticipationintheETS?(optional)
Answersincluded:
Focusonpolicy.
Policy,organisationadjustment.
Manythings:Allaspectsofpolicy,administration,understandinganddealingwiththeofficialunified
system,needsbeprepared.
Systemdevelopment,trainingetc.
Internalportfoliomanagement;strengtheneducationonmarketrisk.
Learningaboutemissionsaccountingrules;standardsandrulesforquotaallocation;evaluationofcarbon
tradingcompliance;and,howtoformacarbonassetmanagementteamasanemittingentity.
Thegovernmentshouldincreaseitssupportforindustrytoachievecarbonemissionreductions.
1)Systemconstruction,organizationanddivisionofresponsibilities;2)laws,regulations,andtrading
methodsrelatedtocarbonemissionstrading;3)supportforcompanies’seniormanagement.
Understandthereasonsforthelevelofemissionsinthisindustry.
Implementingindustryenergyconsumptionstandardswell,andstrengthenenergymanagement.
Section3:Impactsoftheemissionstradingsystemsoninvestmentdecisions
Q3-1:DoyouexpecttheETSinChinatoaffect[yourcompany’s]investmentdecisionsin2017?In2020?In
2025?
2017 2020 2025
No 46 8 5
Yes,marginally 108 49 31
Yes,moderately 70 147 88
Yes,strongly 28 42 107
Don’tknow 7 13 28
Explainyouranswer(optional):Selectionofanswersprovidedonpage26above.
Q3-2:Whattypeofactionsareyouplanningtobecompliant?
Responses Percentage
Tradeallowancesinthemarket 28 68%
UseOffsets(CCERs) 26 63%
Energy-efficiencymeasures 30 73%
Other 6 15%
Answersfor“Other”included:
NotclearonhowindustrycanmakeuseofCCERs
Adjustthetechnologysectionoftheproductionchain
Quotatrusteeship
Onewehavecarboncreditswecantalkaboutthetrading
AccordingtotheThirteenthFYP,usingthelasttwo(offsetsandenergyefficiency)canmeetthe
requirements
Energy-savingreforms,adjustthecompositionofourpowersupply
Thissectionseekstounderstandtheimpactsoftheemissionstradingsystemsoninvestment
decisions.
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Q3-3:WhichdoyouexpecttobethemostimportantpoliciesinmotivatingcompaniestoreduceGHG
emissionsinChinaatdifferentpointsintime?
(Pleaseselectupto3optionsforyears2017,2020,and2025)
2017 2020 2025
ETS 165 171 178
Subsidiesforenergyconservation 113 69 39
Feed-intariffsforrenewableenergy 87 75 50
Mandatoryclosureofinefficientfacilities 135 85 73
Environmentaltax 50 103 138
Environmentalinformationdisclosure 62 83 89
Energyallowancestrading 40 66 86
Selectionofanswersfor“Other”providedonpage28above.
Section4:Pricesinthepilotsystems
Q4-1:HowdothecurrentpricesinETSpilotscomparewithyourexpectations?
Responses Percentage*
Actualpricesarehigher
thanwhatIexpected
23 9%
Actualpricesaresimilar
towhatIexpected
76 29%
Actualpricesarelower
thanwhatIexpected
102 39%
Don’tknow 58 22%
*shareoftotalrespondents,notofoptionschosen,assomerespondentschosemultipleoptions.
Q4-2:Inyouropinion,whatarethemainfactorsinfluencingpricesintheETSpilots?
(Selectoneormore)
Responses Percentage*
Capsettingandfreeallocation 209 80%
Complianceperiod 70 27%
Economicgrowthrate 111 43%
Informationtransparency 124 75%
Governmentregulationandintervention 196 48%
Other 5 1%
Don’tknow 7 3%
*shareoftotalrespondents,notofoptionschosen,assomerespondentschosemultipleoptions.
Thissectioncoversquestionsaboutcurrentcarbonpricelevelsandpriceexpectationsinthe
pilots.
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Section5:ThenationalETS
Q5-1:RegardingthenationalETS,whatdoyouexpecttheintensityoftradingwillbeduringthefirst
compliancecycle?
Tradingwillbe:
Responses Percentage
Active 20 9%
Moderatelyactive 177 84%
Inactive 14 7%
Don’tknow 46 notincluded
Q5-2:BywhendoyouexpectChinanationalETStobefullyfunctional?
e.g.allkeybuildingblocksinplace,including:legislation/law,capandallocationmanagement,complete
MRVAsystem,registry,tradingplatforms,marketoversight,etc.
Responses Percentage
2017 8 3%
2018-2020 114 45%
2021-2025 113 44%
Laterthan2025 19 7%
Never 2 1%
Don’tknow 3 notincluded
Q5-3:WhatlegalbasisdoyouthinkisnecessaryforthestartofthenationalETSinordertoensure
compliance?
Responses Percentage
NationalLawbyNationalPeople’sCongress 160 63%
NationalRegulationbyStateCouncil 82 32%
NationalRegulationatMinistrylevel 10 4%
MinistryNotice 3 1%
Don’tknow 4 notincluded
Q5-4:Doyouthinkarules-basedflexibilitymechanism,suchasastabilityreservetokeeppricesfrom
fluctuatingtoomuch,isnecessary?
Responses Percentage
Yes 220 88%
No 29 12%
Don’tknow 10 notincluded
Explainyouranswers(optional):Selectionofanswersprovidedonpage15above.
Q5-5:DoyouthinkaNewEntrantsReserveisnecessary?
Note:ANewEntrantsReserveconstitutesaspecial-purposepoolofemissionallowancessetaside
fornewcompaniesenteringthecarbonmarket,andcompaniesthatincreasecapacity.
Responses Percentage
Yes 203 84%
No 40 16%
Don’tknow 15 notincluded
Explainyouranswer(optional):Selectionofanswersprovidedonpage16above.
Thissectioncoversquestionsaboutexpectationsondesignandpriceinthefuturenational
ETS.
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Q5-6:HowmanyemissionstradingexchangesshouldoperateinthenationalETS?
Responses Percentage
Withineveryprovince 36 14%
Severalregionalplatforms 124 49%
Onenationalplatform 93 37%
Don'tknow 6 notincluded
Explainyouranswer(optional):Selectionofanswersprovidedonpage17above.
Q5-7:HowshouldbankingofpermitsfromthepilotsystemstothenationalETSbemanaged?
Responses Percentage
Fullbankingofallowances 92 40%
%ofpermitsmaybebanked 112 49%
Nobankingallowed 24 11%
Other 7 3%
Don'tknow 24 notincluded
Explainyouranswer(optional):Selectionofanswersprovidedonpage18above.
Q5-8:Whatshouldbethelevelofreporting?
Responses Percentage
Enterpriselevel 157 64%
Facilitylevel 60 24%
Productlevel 30 12%
Don'tknow 12 notincluded
Q5-9:WhatdoyouexpectthepriceinthenationalETStobeinthecomingyears?(inYuan/tonCO2)
2017 2018 2020 2025
Average 38 51 74 108
Median 30 43 60 100
Standarddeviation 21 32 54 84
10thpercentile 20 22 27 30
20thpercentile 20 30 35 50
80thpercentile 50 62 100 200
90thpercentile 50 100 150 200
Nr.ofresponses 161 160 159 157
Explainyouranswers(optional):Selectionofanswersprovidedonpage21above.
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Section6:China’semissions,internationalcarbonmarketsandinternationalclimatepolicy
Q6-1:WhendoyouexpectChina’scarbonemissionswillpeak?
Responses Percentage
Alreadypeaked 20 8%
Before2020 43 17%
2021-2025 80 31%
2026–2030 91 35%
After2030 25 10%
Noanswer 1 notincluded
Q6-2:DoyouexpectthatChinawilltakeonaGHGemissionstargetfor2025[2030]and,ifso,whattype?
2025 2030
NoTarget 6 3
IntensityTarget 157 82
AbsoluteTarget 85 157
Don’tknow 11 16
Explainyouranswer(optional):Selectionofanswersprovidedonpage30above.
Q6-3:DoyouexpectthatChina’snationalETSwillbelinkedwithanyothersystemsbytheyear2025or
2030?
Responses Percentage
Yes,by2025 81 31%
Yes,by2030 78 30%
After2030 42 16%
Never 35 13%
Don’tknow 24 notincluded
IfYES:Whichones?(Selectoneormore)
Responses Percentage
EUETS 169 84%
CaliforniaETS 54 27%
QuébecETS 38 19%
AlbertaETS 16 8%
SouthKoreaETS 65 32%
NewZealandETS 38 19%
KazakhstanETS 28 14%
RegionalGreenhouseGasInitiative 76 38%
Other 7 3%
*%oftotalrespondentsanswering“Yes”,notoptionschosen,somerespondentschosemultipleoptions.
Q6-4:HowdoyouexpecttheParisAgreementwillaffectprogressoncarbonpricing?(optional)
Selectionofanswersprovidedonpage31above.
Q6-5:Arethereareanyotherinsightsoropinionsthatyouwouldliketoshare?(optional)
Selectionofanswersprovidedonpage32above.
Q6-6:DoyouhaveanysuggestionsforfutureChinaCarbonPricingSurveys?(optional)
Answersavailableonrequest.
ThissectionaimstoputChinanationalETSinthecontextofinternationalcarbonmarketsand
internationalclimatepolicy.
50
Project partners ChinaCarbonForum(CCF)isanindependentandneutralplatformtoengagestakeholdersin
China’sclimatechangesector.CCFpreparesresearchandorganisesfocusedeventstodiscuss
climatechangeissuesinspecificsectors,includingnetworkingevents,research,andpolicy
consultationstodiscussremovalofbarrierstoemissionsreductions,andtodevelopamore
climateresilientsociety.
ICFisrecognisedasaleadingglobalproviderofclimatechangepolicyexpertise.Thefirmhas
officesandenergy/climateexpertsinU.K.,China,Belgium,India,SingaporeandNorthAmerica.
ICFhasover1,500professionalemployeesdedicatedtothestudyofenergy,environmental,and
climatechangeissues.ICF’sBeijingoffice,bringsin-depthknowledgeofthekeyenergy,
environment,economic,andpolicyissuesinChinawitha20-yeartrackrecordofcontinuous
climatepolicycapacitybuildinginChinaandanextensivenetworkofpartnersandrelevant
stakeholders.
SinoCarbonInnovation&InvestmentCo.,Ltd.(SinoCarbon)wasfoundedin2010andis
committedtobecomingaleadingintegratedlow-carbonserviceproviderinChinawithafocus
onpushinglowcarbondevelopmentthroughvariousinnovativepractices.Withaprofound
backgroundinenergy,environmentandfinanceindustries,SinoCarbonpossessesalow-carbon
innovationteamofnearly200professionalsinthefieldsofenergy,information,environment,
finance,business,andlegalandpublicpolicy,skilledandexperiencedinlowcarbonconsultancy
andresearch.Throughconstantinnovation,SinoCarbonhasgainedanoutstandingreputationin
theindustry.
TheDutchEmissionsAuthority(NederlandseEmissieautoriteit,NEa)isacompetentauthority
whichensuresthatcompaniestakingpartintheEuropeanEmissionsTradingSystem(EUETS)
andthelawsandregulationsgoverningrenewableenergyfortransportandairpollutionfrom
fuelsfulfiltheirobligations.TheNEadoessobyprovidinginformationandadviceandby
monitoringthecompaniesinvolved(amongotheractivities).
TsinghuaUniversityChinaCarbonMarketCenter(CCMC)focusesonbothinternationaland
China’sdomesticcarbonmarketresearchanddevelopment.TheDepartmentofClimateChange
ofChina’sNationalDevelopmentandReformCommission(NDRC),China’semissionstrading
authority,providedstrongsupportfortheestablishmentofCCMC,withtheexpectationthat
CMCCwillplayacriticalroleintheestablishmentofChina’snationalemissionstradingsystem
throughprovidingtechnicalandpolicyadvice.
51
Project funders
TheRoyalNorwegianEmbassyNorwayandChinahaveworkedtogetheronenvironmentandclimateissuesfornearlytwodecades.
Thecooperationhasfocusedonenvironmentalmanagementandcapacitybuilding.Norwaysupports
projectsthatcontributetoChina’simplementationofglobalenvironmentalconventions,drawingon
highlyskilledChineseandNorwegianpartnerswithcorecompetenceintheareassingledoutfor
collaboration.Priorityareasforthecooperationhavebeenbiodiversity,climatechangeand
managementofhazardoussubstances,suchasPOPsandMercury.Norwayalsogivesgreat
importancetoourparticipationinandsupporttoChinaCouncilforInternationalCooperationon
EnvironmentandDevelopment(CCICED),ahigh-leveladvisorybodytotheGovernmentofChina.
KingdomoftheNetherlands/MinistryofInfrastructureandEnvironment
TheMinistryofInfrastructureandEnvironmentworkswithChinainthedifferentfieldsofitsportfolio:
infrastructure,spatialplanning,waterresourcemanagement,transportandenvironmentand
climate.TheMinistryhassupportedChinainitsworkonenvironmentanddevelopmentformore
than25years.
ForthisspecificprojecttheDutchEmissionAuthority(NEa)wasassignedbytheMinistrytoshareits
experienceandgiveinput.TheNEaisthecompetentauthorityoftheNetherlandswhichensuresthat
companiestakingpartintheEuropeanEmissionsTradingSystem(EUETS)fulfiltheirobligationsand
hasthereforampleexperiencetosupportChinainitseffortstosetupaETS.
Funded by
Conducted by