In the third series of carbon neutralization and changing China, we combed the three mainstream carbon pricing mechanisms of carbon tax, carbon emission trading and carbon credit in detail, and briefly reviewed their global applications. Carbon tax and carbon emission trading tend to restrict high carbon emission enterprises, while carbon credit mechanism focuses on encouraging emission reduction projects.
The three types of carbon credit mechanisms have different applications. 1) The international carbon credit mechanism, represented by the clean development mechanism and the joint implementation mechanism, has issued about three-quarters of the global carbon credits (CDM, 55%; Ji, 22%), and its main buyers are enterprises incorporated into the EU carbon emission trading system; 2) The independent carbon credit represented by GS and VCs is favored by enterprises that make a net zero emission commitment; 3) Regional and national carbon credits are mainly used to assist the performance of local carbon markets and provide enterprises with a variety of options.
CCER is an important practice of carbon credit mechanism in China. 2002-2012 was the golden decade for the development of international carbon credit CDM mechanism in China. In 2012, after the EU no longer accepted CDM projects from China, it gradually faded out of the historical stage. In the same year, China’s national carbon credit mechanism CCER came into being. In the five years of operation of the CCER mechanism, the national development and Reform Commission has publicized 2871 CCER approved projects, 861 registered projects, and 254 registered emission reduction projects, of which the proportion of renewable energy projects (wind, light and water) exceeds 70%. In 2017, due to the small transaction volume and non-standard market, the national development and Reform Commission suspended the approval of CCER project, which has not been resumed so far.
Wind power and photovoltaic projects have the highest increase in kwh. After averaging the on grid power and issued tons of renewable energy projects among 254 issued projects, it is found that under the assumption of CCER 20 yuan / ton, the hourly power income of wind power projects is 0.0177 yuan, that of photovoltaic projects is 0.0171 yuan, that of hydropower projects is 0.015 yuan, and that of waste incineration projects is 0.013 yuan. Landfill gas projects and forestry carbon sequestration projects can also make profits.
CCER will be in short supply. During the pilot period of carbon trading market, the quotas issued by local carbon exchanges were excessive, resulting in that enterprises only need quotas to perform, and CCER showed a situation of oversupply.
In July 2021, after the official launch of the national carbon trading market, the average annual carbon emission of the first 2225 power generation enterprises included in the transaction exceeded 4 billion tons. According to the 5% offset ceiling ratio, the demand for CCER will exceed 200 million tons per year, while the current issued CCER tons are only 53 million tons / year, which is in short supply. As high energy consuming industries such as steel, nonferrous metals, building materials and aviation are gradually incorporated into the national carbon market, the demand for CCER will further rise. Once the filing of CCER project is officially restored, the supply will increase accordingly. According to the audit speed before the suspension, we expect that the situation of short supply will last for about two years. By the end of the 14th five year plan, the demand of CCER is expected to exceed 500 million tons.
Industry investment rating and investment strategy. In terms of renewable energy, it is suggested to pay attention to new energy operators Cecep Solar Energy Co.Ltd(000591) , China Three Gorges Renewables (Group) Co.Ltd(600905) , Jilin Electric Power Co.Ltd(000875) , Jinko Power Technology Co.Ltd(601778) , Longyuan Power, Datang new energy, Cecep Wind-Power Corporation(601016) ; In the field of solid waste, in the short term, landfill is still one of the main ways of harmless treatment of waste in China. It is suggested to pay attention to the leading power generation 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. It is expected that waste incineration will gradually replace landfill. It is suggested to pay attention to Grandblue Environment Co.Ltd(600323) , Wangneng Environment Co.Ltd(002034) , Everbright environment, Zhejiang Weiming Environment Protection Co.Ltd(603568) , Shanghai Environment Group Co.Ltd(601200) Dynagreen Environmental Protection Group Co.Ltd(601330) and Chongqing Sanfeng Environment Group Corp.Ltd(601827) ; In terms of forestry carbon sequestration, it is suggested to pay attention to Yueyang Forest & Paper Co.Ltd(600963) and Fujian Jinsen Forestry Co.Ltd(002679) .
Risk warning: the restart of CCER project filing is not as expected; Significant changes in CCER trading rules and methodology.
