One week review of China’s carbon market. The activity of China’s carbon market increased this week, with a total turnover quota of 1.1265 million tons, up 19.03% from last week, and the total turnover was 426974 million yuan, down 22.01% from last week.
The average transaction price weighted by trading volume is 37.03 yuan / ton. The highest average transaction price was in Guangdong carbon trading market, with a price of 69.17 yuan / ton, up 10.86% from last week; The lowest average transaction price is the pilot carbon trading in Shenzhen, with a price of 5.82 yuan / ton. Fujian carbon trading market has the highest trading volume, with a turnover of 560000 tons in the past week; The highest turnover is the national carbon trading market, with an amount of 197229 million yuan.
One week review of international carbon market. On March 14, 15 and 17, the European energy exchange (Eex) held three EUA auctions. The auction transaction prices were 78.60 euros / ton, 75.55 euros / ton and 76.87 euros / ton respectively, up 21.62% from the average transaction price of last week; The volume of the three auctions was 2.449 million tons, and the trading volume was the same as last week. The turnover quota of South Korea’s carbon market this week was 186400 tons, up 21.12% from last week; The average transaction price was US $19.98/ton, down 10.25% from last week.
Climate change indicator tracking. On March 18, 2022, the concentration of carbon dioxide in the global atmosphere was 417.91ppm, a decrease of 0.07% compared with March 18, 2021. In the week after March 11, 2022, the overall concentration of carbon dioxide in the global atmosphere fluctuated and increased, with an average of 418.32ppm, an increase of 0.19% over the same period last year and 5.91% over the same period in 2012. Carbon emissions. In 2021, China emitted 11.102 billion tons of carbon dioxide, an increase of 5.22% over the same period last year and 6.12% over the same period in 2019 (before the epidemic). In 2021, the world emitted 35.172 billion tons of carbon dioxide, an increase of 6.22% over the same period last year and a decrease of 0.51% over 2019 (before the epidemic); China accounted for 31.56%.
Industry highlights. Key work of carbon peak and carbon neutralization in 2022: improve the “1 + n” policy system of carbon peak and carbon neutralization; Build a clean, low-carbon, safe and efficient energy system, actively develop distributed new energy, and promote the clean and efficient utilization of coal; Promote low-carbon transformation of industrial structure, implement carbon reduction, transformation and upgrading, and promote the integration of emerging technologies and green low-carbon industries; Comprehensively strengthen energy and resource conservation, and strengthen energy conservation in industry, transportation and buildings; Strengthen institutional and basic capacity-building, and strengthen green economic and trade, technology and financial cooperation.
Small topic research: Interpretation of EU carbon border regulation mechanism (CBAM) and mining of investment value. Over the years, the CBAM draft was adopted by the European Council on March 15, 2022. The purpose of the CBAM mechanism established by the EU is to prevent carbon leakage and protect the competitiveness of domestic enterprises. At present, the mechanism covers five industries: cement, steel, aluminum, chemical fertilizer and electric power. As an important supplement to eu-ets, CBAM may face higher risks of WTO violations and external resistance. The mechanism may have the following impacts on China:
1) the profits of relevant export enterprises have declined, the demand for green power has increased, and the construction of their own carbon footprint system has been improved; 2) The carbon price and coverage of China’s carbon market are in line with that of the European Union. There are potential docking and cooperation opportunities with the European carbon market to promote the introduction of targeted carbon tax policies; 3) The R & D and commercialization of relevant low-carbon innovative technologies in China have accelerated, and the export of low-carbon products is expected to increase.
Investment strategy: mining the investment value in the field of methane emission reduction. After splitting China’s methane emissions, we found that energy activities accounted for 44.8%; Emissions from agricultural activities accounted for 40.2%; Waste disposal accounted for 11.9%, and these three types of activities accounted for more than 90%. Based on this, we sorted out four main investment lines: 1) energy field: due to the limitation of resource endowment, methane escape in oil and gas system is not the key emission source, and the coal industry is the main source of methane emission in China’s energy field. It is suggested to pay attention to Shanxi Blue Flame Holding Company Limited(000968) and Xinjiang Xintai Natural Gas Co.Ltd(603393) ; 2) Solid waste field: in the short term, landfill is still the main way of harmless treatment of waste in China. It is suggested to pay attention to the leading power generator of landfill gas Henan Bccy Environmental Energy Co.Ltd(300614) . In the long term, the greenhouse gas emission of landfill is higher than that of waste incineration, and waste incineration will replace landfill as the main way of solid waste treatment in China. It is suggested to pay attention to Grandblue Environment Co.Ltd(600323) , Everbright environment, Zhejiang Weiming Environment Protection Co.Ltd(603568) , Dynagreen Environmental Protection Group Co.Ltd(601330) and Chongqing Sanfeng Environment Group Corp.Ltd(601827) ; 3) Monitoring field: accurate emission data is the cornerstone of methane emission reduction. It is suggested to pay attention to Hebei Sailhero Environmental Protection High-Tech Co.Ltd(300137) , Anhui Landun Photoelectron Co.Ltd(300862) and Lihe Technology (Hunan) Co.Ltd(300800) , which have methane emission monitoring technology; 4) Agriculture: although agriculture is the second largest methane emission source in China, careful management of the irrigation time and water level of rice fields can reduce methane emissions by 10% – 20%, new water-saving and drought resistant rice can reduce methane emissions by up to 90%, and the substitution of plant protein for animal protein (artificial meat) can also reduce methane emissions from livestock rumination, these technologies are not mature and cannot be used on a large scale, It is recommended to continue to pay attention to potential investment opportunities in the future.
Risk tip: the promotion of relevant policies was less than expected, and the carbon price fell sharply.
