SAIF & Industrial Securities: 2024 China Carbon Market System Research Report

Carbon emission quotas are one of the basic trading products of the carbon emission trading system. In 2011, the National Development and Reform Commission issued the "Notice on the Pilot Work of Carbon Emission Trading", selecting seven provinces and cities, including Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong and Shenzhen, to carry out the pilot construction of regional carbon emission trading markets. In 2013, the Shenzhen carbon emission trading market was officially launched, becoming the first pilot carbon market in China, and other pilot markets were subsequently launched. At the end of 2016, the Fujian carbon emission trading market was launched. The regional pilot has made innovative attempts in the coverage of the carbon market, the quota allocation method, the compliance and use of offset quotas and other rules, providing valuable experience for further improving the carbon trading mechanism.

At the beginning of operation, each pilot market issued corresponding carbon emission trading management measures in the form of local people's congress regulations or local government orders, which stipulated the total quota and allocation and management, trading, monitoring, reporting and verification, incentive and constraint mechanisms. The establishment of laws and regulations is a prerequisite for the effective operation of the carbon emission trading market.

After the national carbon market was launched, some pilot markets revised the original management methods or promulgated new methods in order to further implement the dual carbon goals and clarify the management boundaries and connection mechanisms with the national carbon market.

In terms of the types of greenhouse gases covered, in the initial stage of the pilot, only Chongqing covered the six gases regulated by the first commitment period of the Kyoto Protocol, namely carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride, while other pilot markets only covered carbon dioxide.

From the perspective of participation thresholds, each pilot market sets its own threshold based on the coverage industries and according to its own development status, mostly based on the annual carbon dioxide equivalent of greenhouse gas emissions. When determining the coverage industries, each pilot market fully considers its own economic structure. For example, Beijing and Shanghai give priority to the inclusion of the service industry, Shanghai later includes the shipping industry, and Guangdong adds papermaking and civil aviation industries. When setting the threshold, different thresholds are set for industrial enterprises and other enterprises, and Shanghai sets different thresholds for enterprises in different industries. Moreover, in the process of development, each pilot market continues to lower the emission threshold and expand the coverage industries to cover more enterprises.

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