china ets: current development status and open questions
TRANSCRIPT
China ETS: current development status and open questions
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China’s Emissions
China Emissions －中国二氧化碳排放趋势• Surpass US总量已经超过美国• Amount to approximately 23% of world emissions in 2008 ( US EPA) 大概占全球排放的 23％
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China Energy/Emission Policy Road Map
Policy Road Map:10th 5-year plan (2001-2005) : reduce energy intensity by 24% against baseline year
2000. 十五规划：降低能耗强度 24％ . 能耗强度＝能源消耗量 / GDP，单位吨标准煤 /万元 .
11th5-year plan (2006-2010) :reduce energy intensity by 20% against baseline year 2005. 十一五规划：降低能耗强度 20％
2009Copenhagen Statement: reduce carbon intensity by 40-45% compared to 2005 by 2020. 2009年哥本哈根气候大会：降低碳排放强度 40-45%. 碳排放强度 =二氧化碳排放量 /GDP,单位吨二氧化碳 /万元
12th5-year plan (2011-2015): reduce energy intensity by 16% against baseline year 2010. reduce carbon intensity by 17% against baseline year 2010. 十二五规划：能耗强度降 16％，碳排放强度降低 17％
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Policy Tools
Various policy tools to curb energy consumption 传统政策工具• Subsidy 补贴• Direct Award 奖励• Tax rebate 减税• Energy efficiency standard 强制性的能效标准…
Cap-and-trade during 12th 5 year plan: 1) State Council 12th 5-year Greenhouse emission reduction plan (No. 2011-41):
implementation of market-based instruments and emission trading as a mean to achieve the energy- and carbon-intensity goals. （十二五控制温室气体排放方案：开展碳排放权交易试点，加强碳排放交易支撑体系建设）
2) NDRC Regulation (No.2011-2061): five cities (Beijing, Shanghai, Tianjin, Shenzhen, Chongqing) and two provinces (Guangzhou and Hubei) are selected for pilot schemes implementation （国家发改委关于开展排放权交易试点工作的通知）
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Shenzhen-China’s first operating ETS pilot
Timeline: Oct, 2012 – Provisions on Carbon Emissions Management for Special Economic Zone
Shenzhen(深圳经济特区排放管理若干规定） , promulgated by the People’s Congress of Shenzhen ( the legislative body，人民代表大会常务委员会 ) , making it the first and to date only legal framework for running an ETS in China.目前 7个试点中唯一对碳排管理规定进行立法的地区 . 减排目标为与 2010年相比， 2015年深圳碳排放强度降低 21％。
While all other pilots will have to operate based on administrative decrees, several other pilots are currently trying to pass similar laws through legislation to enhance the ability to oversee and enforce compliance
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Shenzhen ETS
Timeline Jan 2013 – Jun 2013: carbon auditing （碳盘查） & allowance allocation （额度分配） completed
for 635 companies in 26 sectors and 197 large public buildings. 635 companies account for 38% of Shenzhen’s overall carbon emissions; 197 large buildings 2%. Allowances are free. 共 635家企业成为控排企业。
June 18th , 2013: opening of the trading platform for allowances
Trading platform interface, Nov 8th 2013 (right) Settlement price: 48 RMB/ton Amount: 300 tonTrading platform login (below)
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Shenzhen ETS
Timeline: Oct 29th2013 : Shenzhen carbon emission trading interim management regulation published by Shenzhen DRC for public consultation.（深圳市碳排放权交易管理暂行办法，征求意见稿）In total 8 chapters with 82 terms,covering allowance management, reporting, verification compliance, registry and trading etc. Some basics:
Ø 1st trading period: 2013-2015, calendar year 首个交易期从 2013到 2015年Ø Participants: entities with annual emissions above 5000 ton; large public building with area above 20,000 sq meter; governmental buildings with area above 10,000 sq meter. 控排单位为年排放 5,000吨以上的单位Ø Timeline: Supervision body allocates free allowances in Q1 of each year. The emitters under cap should submit the annual emission report and the production report by March 31st of next year, the verification report by April 30th of next year, and fulfill the compliance target (surrender) by June 30 th of next year. 主管部门每年第一季度发放免费配额，控排单位次年 3月 31日前提交排放报告和产出量化报告， 4月 30日前提交核查报告 ,6月30日前完成履约。Ø Adjustment: The free allowances allocated to the emitters in Q1 of each year are not the final value. Supervision body will adjust the value based on actual emission and production amount by May 31 st of next year. The increased value due to adjustment should not exceed 10% of the original value. 企业获得的免费配额为预分配配额， 5月 31日前主管部门根据上一年度实际排放数据和生产数据调整配额数量。增发配额的总数量不超过当年度配额总量的 10%。Ø Allowance price protection mechanism: re-purchase allowances from the market at preset scale & price. The re-purchase amount should not exceed 10% of total allowances. “ ”设计 配额价格保护机制 ，每年按照预先设定的规模和条件从碳市场回购配额。回购数量不高于当年度有效配额数量的 10%。
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Shenzhen ETS
Example: Company A produces laptops Profit for each laptop: 500 CNY/unit Carbon footprint for each laptop: 100 kg/unit Therefore carbon intensity is : 0.2kg/CNY or 200 ton/million CNY
Target: to keep carbon intensity at 200 ton/million CNY
At beginning of 2013, the company expects to produce 100,000 laptops in 2013 and the profit is 50 million. Therefore it gets a preliminary allocation of 10,000 allowancesfrom the government.
By end of March 2014, the company submits actual emission and production reports to the government and only 50,000 laptops are produced and sold throughout the year at the samemargin, resulting in a profit of CNY 25m,then the amount of allowances will be adjusted basedon the locked intensity of200 ton/million CNY. Then the preliminary allocation of 10,000allowances is adjusted to 5000.
Adjustment example (not the real one) 配额调整模拟案例
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EU ETS: Price crashes from 30 euro to 3 Euro due to over allocation caused by financial crisis .
Allowance amount allocated to each company is a fixed value and doesn’t change even the actual emission and production decreases to zero. It causes over allocation and price crash.
Shenzhen ETS
Adjustment and price protection mechanism: to avoid over allocation and price crash配额调整及价格保护机制：防止价格失控
欧盟 ETS价格失控： 2005至 2012年欧洲企业配额主要为政府事先免费发放，中国试点区相似。但欧洲为固定值，不作事后调整。
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Some open questions
• Capping direct and indirect emissions电力行业直接排放（供应端） Vs 消费者间接排放（需求端）的管控
The Chinese power sector is heavily regulated, it is very difficult for electricity producers to pass down costs to consumers without major pricing reforms, hence the pragmatic solution was to simply include Scope 2 (indirect emissions) and cap the demand side instead of the supply side. （电力价格管制，很难将碳排放控制成本传导至需求端，从而影响消费者耗能行为 . 故理论上因只纳入需求段的间接排放）
However, the utilities are included as well. Though there could be double counting issues, one can only assume that the Shenzhen government has the long-term ambition to move the cap directly to emission sources (as it is the case in other major ETS systems).（但目前中国试点区同时纳入了电力行业的直接排放，也纳入了需求端的间接排放，存在重复计入问题）
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Some open questions
• Intensity based cap and allowances 强度目标 Vs配额调整
The cap is GPD or industrial added value related. Therefore the Shenzhen government will have to intervene in the market to fine-tune the number of allocated allowances in relation to actual GDP output. The exact nature of market intervention mechanisms has not been disclosed yet， thought it is mentioned in Shenzhen interim management regulation. (配额调整机制目前还未有细则发布）
Since industrial value is also very important, Shenzhen DRC has stated that they will coordinate with utilities and other departments (energy, tax) to crosscheck reported information from enterprises. How exactly that process will work has not been specified yet
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Some open questions
• Reporting, confidentiality and disclosure信息透明度 Vs 保密度
No public registry 无公开的注册表信息，无企业分配额度信息 No visibility on allocation methodologies 未公开配额总量设定及分配方法 Unclear allocation rules, accreditation criteria for verifiers and details on
compliance procedures and surrendering of allowances….. 核查机构资质 &履约机制等还不够清楚
Possible reasons: 1) things are not ready yet; 2) fear of disclosure of valuable information to their competitors.
So far it is impossible to determine exactly how many allowances have been allocated to date.Taken together with the absence of future contracts and price signal, this lack of transparency will very likely have major implications on trading activity and behavior of ETS participants 对价格预测及交易存在很大影响
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Example: EU ETS National and Company Level
http://www.emissionshandelsregister.at/fileadmin/site/emissionshandel/pdf/enAT_NAP2_2008-2012.pdf
The allowances to each sector, each sub sector and each company are provided before the compliance period. Below is one page from the National Allocation Plan for Austria 2008-2012 , published in 2007 (奥地利国家 2008－ 2012年分配方案，于2007年发布）
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Example- European Union Transaction Log public view
http://ec.europa.eu/environment/ets/welcome.do?languageCode=nl
In EUTL, the verified emissions, allowances assigned to each company and their surrendered units information are provided. Below is the information for Michelin Tyre Company in Germany
米其轮胎林公司登记表
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Some open questions
• Enforcement of compliance 惩罚机制
The authority of DCR to enforce compliance should be legislated. Through ““Provisions on Carbon Emission Management for the Special Economic Zone Shenzhen”, Shenzhen DRC can fine non-complying emitters at three times the market price.发改委的惩处权限需要立法支持 . 目前深圳可以对违规企业的超排量处以 3倍市场价格的处罚
Other ETS pilots lacking such legislation are currently struggling to find waysto allow their local DRC to fine non-complying emitters at a higher rate instead of administrative fines, which are capped at CNY 30,000 ( too low!)其他未立法的试点地区，目前只能依据行政指令作为处罚依据。处罚权限很少，处罚总额最高为 3万元。欧盟 EU ETS处罚标准为每超排一吨，处罚约 800人民币。
