Viewpoint | A brief discussion on the development of carbon emissions trading in the EU and China
Published:
2022-12-20
1. EU reaches interim agreement on carbon border adjustment mechanism (CBAM) On the morning of December 12, the European Commission, the European Council and the European Parliament held the fourth round of tripartite consultations on the EU Carbon Border Adjustment Mechanism/CBAM. In the early hours of the 13th, negotiators from the EU Council and the European Parliament reached an interim and conditional agreement on CBAM. The agreement needs to be confirmed by the ambassadors of EU member states and the European Parliament, and finally adopted by the EU Council and the European Parliament. CBAM is one of the key elements of the EU Fit for 55 (55% carbon reduction) package. In December 2019, the European Commission formally proposed in the European Green Agreement that the integrity and effectiveness of its own climate policy should be avoided by imposing tariffs on imported goods whose carbon emissions during the production process do not meet EU standards. "Carbon leakage" has been destroyed, while also protecting the competitiveness of EU companies. The European Council set a target for the EU to cut its greenhouse gas emissions by at least 55 percent by 2030 compared to 1990 levels and achieve carbon neutrality by 2050, which is binding on the EU and its member states. In order to achieve these goals, the EU needs to develop new rules and new legislation, and member states take concrete measures to reduce carbon emissions and make the green transition a reality. 2. EU Fit for 55 package in legal form to promote carbon neutrality In July 2021, the EU released the Fit for 55 (55% carbon reduction) package as a set of legislative proposals and amendments to existing EU legislation, which will help the EU reduce its net greenhouse gas emissions and achieve climate neutrality. Its contents include 12 new bills such as expanding the EU carbon market, stopping the sale of fuel vehicles and expanding the proportion of renewable energy, which will have a wide impact on a global scale. Referring to the official website of the European Parliament, the author made an overview of Fit for 55 (55% carbon reduction) plan as follows: Since the adoption of the CBAM programme by the European Parliament on 22 June 2022, the Council of the European Union, the European Parliament and the European Commission have held three consultative meetings on 11 July, 4 October and 8 November respectively. Regarding how the EU will turn its climate targets into law, referring to the official website of the European Parliament, the author makes the following flowchart: 3. EU CBAM Application Overview The CBAM aims, in full compliance with international trade rules, to prevent the EU's greenhouse gas reduction efforts from being offset by increasing emissions outside its borders by shifting production to non-EU countries that are less robust than the EU in combating climate change, as well as to prevent increased imports of carbon-intensive products. Designed to operate in parallel with the EU Emissions Trading System (EU ETS), the CBAM will gradually replace the existing EU mechanism to address the risk of carbon leakage, in particular the free allocation of EU ETS allowances. Jozef Síkela, Minister of Industry and Trade of the Czech Republic, which holds the rotating EU presidency, said that CBAM is an important part of the EU's climate action. The mechanism promotes non-EU businesses to export goods to the EU that meet the high climate standards of the 27 EU member states, which will encourage the EU's partners in the world to join the EU's climate efforts. Regarding the products and industries covered by the new rules, CBAM will initially cover some of the most carbon-intensive industries and products, such as steel, cement, fertilizers, aluminum, electricity and hydrogen, indirect emissions under certain conditions, and a proportion of downstream products, such as screws, bolts and similar items of iron or steel. Under the interim agreement, CBAM will apply from October 2023, with a transition period. The initial CBAM was relatively streamlined, designed to collect data and largely applied only to reporting obligations. The follow-up CBAM will continue to improve and phase out the free quota under the EU carbon emission system (ETS), that is, in international trade, companies need to purchase corresponding carbon credits. Currently, there is no agreement on phasing out free quotas for the CBAM industry. CBAM also has a protection exemption mechanism-countries that are consistent with EU emission reduction standards will not be subject to carbon tariffs, but the country should have an exact carbon trading price. Development Status and Vision of China's Carbon Emissions in 4. China is the largest carbon emission country in the world, and the application of CBAM will have a great impact on China's export trade. Mei Dewen, general manager of the Beijing Green Exchange and secretary-general of the Beijing Green Finance Association, said that compared with the EU carbon market, China's carbon market is characterized by small transaction scale, low transaction prices, lack of liquidity, and weak investment and financing functions. The establishment of a more large-scale and liquid green financial system, especially the carbon market, can reduce costs, improve efficiency, alleviate the challenges faced by China's carbon market, and achieve carbon peak and carbon neutrality. China launched its National Emissions Trading System (China ETS) in July 2021, making it the world's largest emissions trading system. ETS puts a price on carbon emissions. It is an important part of China's plan to use market mechanisms to achieve carbon peak in 2030 and net zero emissions in 2060. Climate legislation is an important legal guarantee for countries to achieve the goal of carbon peak and carbon neutrality. On December 31, 2020, the Ministry of Ecology and Environment issued the Measures for the Administration of Carbon Emissions Trading (Trial), which will come into effect on February 1, 2021. The evaluation standards for key greenhouse gas emission units, the total amount of carbon emission allowances Set and allocation, emission trading entities, as well as emission verification and quota clearance, supervision and management, and penalties for breach of contract. The national unified carbon trading market was officially opened, and the carbon emissions trading system was officially launched. On July 5, 2022, the State Council's 2022 Legislative Work Plan issued by the General Office of the State Council clearly listed 16 administrative regulations to be formulated and revised, including the Interim Regulations on the Administration of Carbon Emissions Trading drafted by the Ministry of Ecology and Environment. The promulgation of the regulations will standardize the trading of carbon emission rights, strengthen the control and management of greenhouse gas emissions, promote the realization of the peak goal and neutralization vision of carbon dioxide emissions, promote the transformation of economic and social development to green and low-carbon, and promote the construction of ecological civilization. Externally, China should actively participate in the formulation of global climate change rules and international carbon pricing rules, maintain the WTO most-favored-nation treatment principle and the principle of national treatment, and carry out extensive international cooperation. The European Union has made some breakthroughs and achievements in carbon reduction and energy saving. China can learn from its carbon policy, accept the EU climate change rules differently from the basic national conditions, regulate the carbon emission trading market action by law, clearly unify the carbon price system and accounting rules, and establish a carbon system suitable for climate change to achieve the goal of carbon neutrality. China's carbon trading market is in its infancy, and there is a certain gap between China's carbon trading market and the European Union and other relatively mature markets. However, under the guidance of the government's macro-control, it is believed that China's carbon market is in the ascendant and has a bright future.
1. EU reaches interim agreement on carbon border adjustment mechanism (CBAM)
On the morning of December 12, the European Commission, the European Council and the European Parliament held the fourth round of tripartite consultations on the EU Carbon Border Adjustment Mechanism/CBAM. In the early hours of the 13th, negotiators from the EU Council and the European Parliament reached an interim and conditional agreement on CBAM. The agreement needs to be confirmed by the ambassadors of EU member states and the European Parliament, and finally adopted by the EU Council and the European Parliament.
CBAM is one of the key elements of the EU Fit for 55 (55% carbon reduction) package. In December 2019, the European Commission formally proposed in the European Green Agreement that the integrity and effectiveness of its own climate policy should be avoided by imposing tariffs on imported goods whose carbon emissions during the production process do not meet EU standards. "Carbon leakage" has been destroyed, while also protecting the competitiveness of EU companies.
The European Council set a target for the EU to cut its greenhouse gas emissions by at least 55 percent by 2030 compared to 1990 levels and achieve carbon neutrality by 2050, which is binding on the EU and its member states. In order to achieve these goals, the EU needs to develop new rules and new legislation, and member states take concrete measures to reduce carbon emissions and make the green transition a reality.
2. EU Fit for 55 package in legal form to promote carbon neutrality
In July 2021, the EU released the Fit for 55 (55% carbon reduction) package as a set of legislative proposals and amendments to existing EU legislation, which will help the EU reduce its net greenhouse gas emissions and achieve climate neutrality. Its contents include 12 new bills such as expanding the EU carbon market, stopping the sale of fuel vehicles and expanding the proportion of renewable energy, which will have a wide impact on a global scale. Referring to the official website of the European Parliament, the author made an overview of Fit for 55 (55% carbon reduction) plan as follows:
Since the adoption of the CBAM programme by the European Parliament on 22 June 2022, the Council of the European Union, the European Parliament and the European Commission have held three consultative meetings on 11 July, 4 October and 8 November respectively. Regarding how the EU will turn its climate targets into law, referring to the official website of the European Parliament, the author makes the following flowchart:
3. EU CBAM Application Overview
The CBAM aims, in full compliance with international trade rules, to prevent the EU's greenhouse gas reduction efforts from being offset by increasing emissions outside its borders by shifting production to non-EU countries that are less robust than the EU in combating climate change, as well as to prevent increased imports of carbon-intensive products. Designed to operate in parallel with the EU Emissions Trading System (EU ETS), the CBAM will gradually replace the existing EU mechanism to address the risk of carbon leakage, in particular the free allocation of EU ETS allowances.
Jozef Síkela, Minister of Industry and Trade of the Czech Republic, which holds the rotating EU presidency, said that CBAM is an important part of the EU's climate action. The mechanism promotes non-EU businesses to export goods to the EU that meet the high climate standards of the 27 EU member states, which will encourage the EU's partners in the world to join the EU's climate efforts.
Regarding the products and industries covered by the new rules, CBAM will initially cover some of the most carbon-intensive industries and products, such as steel, cement, fertilizers, aluminum, electricity and hydrogen, indirect emissions under certain conditions, and a proportion of downstream products, such as screws, bolts and similar items of iron or steel.
Under the interim agreement, CBAM will apply from October 2023, with a transition period. The initial CBAM was relatively streamlined, designed to collect data and largely applied only to reporting obligations. The follow-up CBAM will continue to improve and phase out the free quota under the EU carbon emission system (ETS), that is, in international trade, companies need to purchase corresponding carbon credits. Currently, there is no agreement on phasing out free quotas for the CBAM industry. CBAM also has a protection exemption mechanism-countries that are consistent with EU emission reduction standards will not be subject to carbon tariffs, but the country should have an exact carbon trading price.
Development Status and Vision of China's Carbon Emissions in 4.
China is the largest carbon emission country in the world, and the application of CBAM will have a great impact on China's export trade. Mei Dewen, general manager of the Beijing Green Exchange and secretary-general of the Beijing Green Finance Association, said that compared with the EU carbon market, China's carbon market is characterized by small transaction scale, low transaction prices, lack of liquidity, and weak investment and financing functions. The establishment of a more large-scale and liquid green financial system, especially the carbon market, can reduce costs, improve efficiency, alleviate the challenges faced by China's carbon market, and achieve carbon peak and carbon neutrality.
China launched its National Emissions Trading System (China ETS) in July 2021, making it the world's largest emissions trading system. ETS puts a price on carbon emissions. It is an important part of China's plan to use market mechanisms to achieve carbon peak in 2030 and net zero emissions in 2060.
Climate legislation is an important legal guarantee for countries to achieve the goal of carbon peak and carbon neutrality. On December 31, 2020, the Ministry of Ecology and Environment issued the Measures for the Administration of Carbon Emissions Trading (Trial), which will come into effect on February 1, 2021. The evaluation standards for key greenhouse gas emission units, the total amount of carbon emission allowances Set and allocation, emission trading entities, as well as emission verification and quota clearance, supervision and management, and penalties for breach of contract. The national unified carbon trading market was officially opened, and the carbon emissions trading system was officially launched.
On July 5, 2022, the State Council's 2022 Legislative Work Plan issued by the General Office of the State Council clearly listed 16 administrative regulations to be formulated and revised, including the Interim Regulations on the Administration of Carbon Emissions Trading drafted by the Ministry of Ecology and Environment. The promulgation of the regulations will standardize the trading of carbon emission rights, strengthen the control and management of greenhouse gas emissions, promote the realization of the peak goal and neutralization vision of carbon dioxide emissions, promote the transformation of economic and social development to green and low-carbon, and promote the construction of ecological civilization.
Externally, China should actively participate in the formulation of global climate change rules and international carbon pricing rules, maintain the WTO most-favored-nation treatment principle and the principle of national treatment, and carry out extensive international cooperation. The European Union has made some breakthroughs and achievements in carbon reduction and energy saving. China can learn from its carbon policy, accept the EU climate change rules differently from the basic national conditions, regulate the carbon emission trading market action by law, clearly unify the carbon price system and accounting rules, and establish a carbon system suitable for climate change to achieve the goal of carbon neutrality.
China's carbon trading market is in its infancy, and there is a certain gap between China's carbon trading market and the European Union and other relatively mature markets. However, under the guidance of the government's macro-control, it is believed that China's carbon market is in the ascendant and has a bright future.
Key words:
Related News
Zhongcheng Qingtai Jinan Region
Address: Floor 55-57, Jinan China Resources Center, 11111 Jingshi Road, Lixia District, Jinan City, Shandong Province
