From BIGGER to BIGGEST ---China s Carbon Market 广州碳排放权交易所 China Emissions Exchange

Transcription

1 From BIGGER to BIGGEST ---China s Carbon Market 广州碳排放权交易所 China Emissions Exchange 2014/3/25 1

2 一 NAMAs and Chinese ETS 二 From CDM to CCER 三 Waste or Gold Mine 2014/3/25 2

3 NAMAs and Chinese ETS 2012 Trading volume of global carbon market reaches 10.7 billion tons, 26% increase year-by year; 61 billion Trading volume of global market is 5.7 billion tons, 21 billion dollar. Average carbon unit price fall below 5.7 euro per ton, only half of 2011 level (11.2 euro/ton) Average price is 3.7 euro/ton, CER? 0.XX euro/ton Source: World bank & IETA Worth Doing? Or start our own trading system? 2014/3/25 3

4 NAMAs and Chinese ETS Clear National Policy Before establishing national carbon market Target: commitment to reduce the CO2 emissions per unit of GDP by 40 to 45 percent from 2005 levels and use non-fossil fuels for about 15 percent of our energy. Top Level Plan: 18 th National Congress of the CPC propose to carry out the carbon emissions trading. Working Plans: State Council published 12 th Five year plan on controlling GHG emission, which also emphasize the importance of carbon emissions trading. NDRC published Notice of national development and reform commission agreement in carbon emissions trading pilot, which proves seven pilots to launch ETS. CPC Central Committee and State Council published Decisions on enhancing work for coping climate change. 2014/3/25 4

5 NAMAs and Chinese ETS Comparison of five pilots that have been launched. Covered Emission/Regional Gross Covered Sectors Guangdong Shanghai Tianjin Beijing Shenzhen 43%-50% About 50% About 60% About 40% 38% Power, cement, steel, iron, 16 sectors: industrial sectors Iron and steel producers, Electricity providers, heating Almost all sectors. 26 sectors petrochemicals) (electricity, iron & steel, chemical facilities, power and sector, manufacturers for now. Including industrial Textile, non-ferrous metals, petrochemical, non-ferrous heat generators, oil and gas (automobile, cement, companies, building sector and plastic, paper may be included metal, chemical, building exploitation, residential petrochemicals) and major electricity generators. later. materials, textile, pulp & paper, buildings. public buildings (health, Transport inclusion under Transports and buildings rubber, chemical fiber), other education, banking, ) consideration. (public, commercial) sectors (airlines, ports, airports, construction are part of the railway, commercial, hotel and newly released regulation financial sector buildings) Allowance Vol. 388 mtons 160 mtons 160 mtons 103 mtons 30 mtons Starting Date 2013/12/ /11/ /12/ /11/ /6/18 For P1: mainly grandfathering One-off free allocation for Free allocation based on Free allocation based on Allocation methods based on emissions, considering sectors characteristics based on emissions, growth considered. Whenever possible, benchmarks will be used. historical emissions (existing entities) and benchmarks (new entrants). emissions or carbon intensity (corrected by a sector-specific factor) declining with time. New entrants allocation based on benchmarks. Free allocation based on firms historical emissions, performance and future activity level. Allowance Allocation Offset mechanism Enforcement/Penalty (including administrative penalty) CCERs allowed for up to 10% of compliance obligation, 70% of which must stem from local projects. Fraud in emission report: rectification and then 10k -30k penalty/firm. Impediment of verification work: rectification and then 10k -30k up to 50k penalty/firm. For non-compliance penalty: deduct 2 times the missed quota from next year s allowances and 50k penalty Also penalties for fraud of trading exchange and verification entities. Up to 5% of annual compliance obligation. Failed to submit emission report in due time: or fraud in emission report rectification and then 10-30k/firm. Impediment of verification work: rectification and then 30k -50k /firm. Non-compliance penalties range from 5, ,000 RMB/firm. Also penalties for fraud of trading exchange and verification entities. Up to 10 % of CCERs are allowed for compliance obligation. Levels and details of penalties not specified. Up to 5% of CCERs are allowed for compliance obligation. At least half of used CCERs must originate from local projects (except certain types of projects owned by liable entities). Failed to submit emission report in due time: rectification and then 50,000/firm. For non-compliance:3-5 times market carbon price for every missing allowance. Up to 10 % of CCERs are allowed for compliance obligation. Failed to submit emission verification report in due time or fraud: rectification and then k/firm. For non-compliance: reduction from following year s allowances and 3 times the market price for every missing allowance. Also penalties for fraud of trading exchange and verification entities. MRV Reporting before 31 th March, Verification by a third party is required and report submitted before 30 th April, Compliance before June 20 Allocation on July 1 each year Following-year monitoring report submitted by December 31. Yearly emissions report by March 31 and verification report by a 3 rd party submitted by April 30. Annual compliance between June 1 and June 30. Following-year monitoring report submitted by November 30. Yearly emissions report and verification report by a 3 rd party submitted by April 30. Compliance by May 31. Not allowed to use the same verification agency for 3 consecutive years. Yearly emissions reports submitted by April 15. Verification by accredited 3 rd party required and report submission before April 30. Allowance allocation by June 30 and compliance by June 15. Compliance information dissemination before end July. Yearly emissions report submitted by March 3, and verification report submitted by a third party before April 30. Yearly allowance allocation before May 31. Compliance by June 30. Not allowed to use the same verification agency for 3 consecutive years. Compliance information dissemination before end July. Trading Trading Platform CEEX SEEEX CTEEX CBEEX CERX OTC Not Allowed Not Allowed Not Allowed Allowed, need to Not Allowed register Trading Products GDEA&CCER(SPOT SHEA&CCER(SPOT TJEA&CCER(SPOT) BEA&CCER(SPOT) SZA&CCER(SPOT) ) ) Allowed Participants Compliance entities, individuals and investment institutions. Compliance entities, individuals and investment institutions. Compliance entities, individuals and investment institutions. Compliance entities Investment institutions, individuals are not allowed. Compliance entities, individuals and investment institutions. 2014/3/25 5

6 NAMAs and Chinese ETS How big is Chinese carbon market Assuming all seven pilots launch as planned EU China CA-Quebec Korea Australia Resource: BNEF, Point Carbon In million allowances It is estimated that National wide Chinese carbon market will be bigger that EU, could ve reach 25 billion allowances. 2014/3/25 6

7 From CDM to CCER CDM Legacy Thousands of emission reduction projects established in relatively short time Capacity in MRV and project developing Fairness---Issuance system v.s. Corruption Methodology system is mature /3/25 7

8 Area distribution of approved projects From CDM to CCER Till 24 th February 2014, NDRC approved 5007 Chinese CDM proejcts. 2014/3/25 8

9 From CDM to CCER Approved CDM projects in characters Energy Efficiency Renewable Alternative Energy Methane Utilization NO2 Destruction HFC-23 Waste Incineration Reforestation Others We expect same proportion in CCER projects portfolio 2014/3/25 9

10 From CDM to CCER What is CCER: Chinese Certified Emission Reduction CDM CCER Methodology Modified EB Chinese NDRC Buyer:Annex I Domestic entities 2014/3/25 10

11 From CDM to CCER What projects are eligible to become CCER? Constructed after 2005/2/16 Applied NDRC approved methodology Has been approved by NDRC as CDM projects but not registered in EB Produced ER before registered in EB and proved by NDRC Registered in EB but has not yet been issued 2014/3/25 11

12 From CDM to CCER Approximately 150 CDM methodologies have been transferred into Chinese CCER methodology and approved by NDRC 2014/3/25 12

13 Waste or Gold mine? Composition of China s GHG emission by sectors in 2005 and 1994 Agriculture 15% Waste manag. 4% Agriculture 11% Waste manag. 2% Industrial processes 7% Energy 74% Industrial processes 10% Energy 77% Source: P.R.C. Initial and Second National Communication on Climate Change 2014/3/25 13

14 Waste or Gold mine? 2-3% of gross Guangdong emission = million tons Source: Point Carbon Carbon Market Monitor. 2014/3/25 14

15 Waste or Gold mine? 85 projects under public review, total estimated ER reaches 25 million tons, in which waste projects contributes to 584,149 tons of ER. Methane Capture from Farm Landfill Gas Municipal Solid Waste Maximum Demand of CCER during pilots period is 87 million tons---great Opportunities 2014/3/25 15

16 Waste or Gold mine? Example of revenue structure of Guangdong local Waste Power Plant (Treat 1500tons of waste per day and generate 550,000kw) Waste treatment subsidiary (20-30%) Carbon sales (5-15%) Power Sales(With Feed-in-tariff 0.65Yuan/kw ) 70-80% Profitable Source: Interview with plant investor 2014/3/25 16

17 Waste or Gold mine? Problem 2014/3/25 17

18 Challenges For Potential National ETS: Data collection and data quality Top-down implementation of ETS Integrate pilots ETS and national ETS in harmony way Huge amount of capacity building work MRV and upfront cost incurred with establishing Chinese ETS For Voluntary Market (CCER), especially for waste sector: Without stable price signal, investors are more attracted with large scale projects (project cost coverage) Need more flexible methodology to develop small scale projects or PoA Whether waste power plant should be covered by ETS or be allowed to develop CCER project and obtain credits profit. Co-benefits requirement/standards? Environment? Society? etc 2014/3/25 18

19 Thanks Warren Li, Senior Business Manager China Emissions Exchange 2014/3/25 19