Research conclusion
Whether the extreme weather in Europe in 2021 will lead to energy security risks in the process of replacing fossil energy with renewable energy has attracted widespread attention, and Russia and Ukraine have further sounded the alarm for energy security. At the beginning of last year, the extreme cold weather in Europe combined with the lack of wind in the third quarter. Since the second half of last year, the prices of natural gas, electricity and carbon emissions in Europe have soared to an all-time high, triggering concerns about energy security in European countries. After the conflict between Russia and Ukraine, due to the high dependence of most European countries on Russian natural gas, the prices of natural gas and electricity continued to rise. Recently, the EU carbon price has been decoupled from the natural gas price, and the price of the EU carbon emission quota (EUA) has fallen rapidly. In addition to the withdrawal of risk aversion funds, the high energy price increases the burden on local industrial enterprises, which may lead to production reduction, which is also an important factor in the fluctuation of carbon price.
In this context, ensuring energy security has become an important consideration. On February 28 this year (just a week after the conflict between Russia and Ukraine on February 22), the German Ministry of economy proposed a draft legislation to be enacted, which plans to accelerate the expansion of wind energy and Cecep Solar Energy Co.Ltd(000591) infrastructure, and advance the target of 100% renewable energy power supply to 2035 (originally planned to 2050). The contents include: (1) considering the insufficient investment in energy infrastructure such as energy storage in the early stage, fossil energy investment will be increased in the short term to ensure energy security; (2) Accelerate the investment of medium and long-term renewable energy and fundamentally solve the problem of short supply of natural gas in Europe.
"Carbon tariff" is expected to bring some financial support to the EU's energy transformation. This policy has the risk of shortening the transition period and affecting China's export trade, but the range is limited. According to the calculation of relevant literature, CBAM (carbon border regulation mechanism) can bring 1.5 billion euros of direct income to the EU in 2026, becoming one of the supports for green transformation investment. We expect that: (1) the EU may charge "carbon tariff" in advance by shortening the transition period. Considering that there are concessions between the United States and Europe on the key issue of how to measure carbon costs, the resistance of the EU to implement the first phase of CBAM will be reduced, and the necessity of a three-year transition period will also be reduced. In the revised draft at the beginning of 2022, the Parliamentarians of France, Belgium and Slovakia also mentioned the need to shorten the transition period by one year, That is, it will be levied on January 1, 2025; (2) At present, the products covered have a relatively limited impact on China's exports, because they only include cement, steel, electricity, aluminum and chemical fertilizer. Since it does not include composite terminal products such as mechanical and electrical equipment, in 2020, China's commodity exports covered by CBAM accounted for only 1.31% of China's exports to Europe (1.19% according to the United Nations data), with a ratio of about 0.03% to GDP. The direct impact on China's exports and economy is relatively limited, mainly Turkey (cement), Russia (chemical fertilizer, steel, aluminum) Belarus (fertilizer) and other countries. Looking forward to the follow-up, the expansion of product coverage will be cautious. On the one hand, there needs to be consultation between the "climate club" of the U.S. and European Union. On the other hand, it is difficult for composite end products such as mechanical and electrical products to be included in the scope of Taxation.
We believe that under the situation of "the global epidemic continues, the world economic recovery is insufficient, and commodity prices fluctuate at a high level", the importance of energy security at home and abroad will increase significantly. Whether it is the previous discussion on Europe or China's series of policies to stabilize growth this year, "stand first and then break" will become the main theme, This also means that: (1) the withdrawal of traditional energy will be based on the premise of normal production and life, the margin of restrictive policies will be weakened, and the energy consumption intensity target will be comprehensively assessed during the 14th Five Year Plan period with appropriate flexibility; (2) At the same time, the rhythm of carbon neutralization related policies conducive to steady growth will not be affected, such as coal-fired power energy conservation and carbon reduction transformation, flexibility transformation, heating transformation, planning and construction of large-scale wind and solar power base and its supporting regulatory power supply, which is not only conducive to fixed asset investment, but also the premise and foundation of "building first and breaking later" and ensuring energy security, The priority is expected to be further improved.
Risk tips
The European carbon border regulation mechanism has not yet been finalized, and there may be changes in the transition period, the scope of goods covered and the free quota after the transition period, with high uncertainty on the impact on China's import and export. If CBAM completely covers all the commodities in the third phase of euets, the proportion of China's commodity exports covered by CBAM in exports to Europe will increase by about 8 percentage points.
Extreme weather affects the progress of global climate goals.
