While the 1-year-old national-level carbon trading system has helped to shape the basic structure of the Chinese carbon market and provide a benchmark for carbon pricing, continued efforts should be made to nurture more active trading and include more participants, experts said.

 

In the year since carbon trading officially began on July 16 last year, up to 194 million metric tons of carbon emission allowances have been traded, with the total trading value approaching 8.5 billion yuan ($1.23 billion), according to the Ministry of Ecology and Environment. The price of carbon emission allowances closed at 58.24 yuan per ton on July 15, up 14 percent from that on the first trading day.

 

The national carbon trading market now covers 2,162 companies, all of which are electricity companies.

 

Stable operation

 

Li Gao, director of climate change at the Ministry of Ecology and Environment, said that the stable operation of the national-level carbon trading system and the steadily rising prices have helped to shape the basic structure of China's carbon market. Companies have therefore been motivated to reduce greenhouse gas emissions and head for greener transformation at a faster pace, he said, and the trading system has effectively set carbon pricing.

 

To enrich the financial characteristics of carbon trading, the China Securities Regulatory Commission released industrial standards in mid-April for carbon-related financial products.

 

More banks have implemented carbon emission rights pledge loans, and financial products linked to the carbon market have begun to emerge.

 

In August last year, Datang International Power Generation Co's plant in Qitaihe, Heilongjiang province, obtained a 40 million yuan loan from China Minsheng Bank, with the company's carbon emission rights serving as a guarantee. It was the first loan of the kind in China.

 

One month later, China Datang Carbon Assets Co, a subsidiary of Datang International, teamed up with Postal Savings Bank of China to initiate the carbon asset pledge management model with which the Qitaihe power plant was granted another 20-million-yuan pledge loan based on carbon emission allowances.

 

Hong Shaobin, marketing director of Datang International, said carbon emission allowances are a green asset whose value is easy to assess, and they entail fewer risks and convert to cash more conveniently.

Green assets

 

"Companies' carbon emission allowances can be transformed into credit assets that link financial assets and the real economy," he said.

 

Yu Zhongbo, vice-general manager of Beijing Peace Carbon Environmental Technology, said that most of China's leading electricity groups began to reduce their carbon footprint about 10 years ago and are now well aware of carbon reduction policies and trading rules. Most of these companies have even set up their own carbon asset management companies, Yu said.

 

The progress is evident. Shanghai-listed Datang International saw 302 million yuan of income from carbon trading for fiscal year 2021, after national carbon trading had been operational for only half of a year. In addition, Huaneng Power International Inc made 269 million yuan, and Huadian Power International Corp realized 140 million yuan in income from carbon trading.

 

"While companies were passively reducing carbon emission according to government requirements in the past, they are now attaching increasing importance to the value of carbon and are eager to manage their carbon assets well," said Yu.

 

According to the Ministry of Ecology and Environment, the first compliance cycle of China's carbon market took place from Jan 1 to Dec 31, 2021. Preparations to launch the second compliance cycle started on March 15 this year, marked by the release of the guideline for management of 2022 greenhouse gas emissions, said Zhang Jianhong, senior engineer at China International Engineering Consulting Corp.