Recently, at COP28, the 21st Century Business Herald interviewed the Ministry of Ecology and Environment on issues related to the carbon market. Among them, the Ministry of Ecology and Environment answered the question of how to internationalize the national carbon market:
The Ministry of Ecology and Environment (MEE) attaches great importance to the internationalization of the carbon market for accelerating global climate action, and is willing to work with various carbon market mechanisms to explore feasible implementation paths and policy tools to promote greenhouse gas emission reduction. The implementation of cross-border carbon trading involves the convergence with relevant international rules, which will have an impact on China's completion of the nationally determined contribution target, and needs to be managed by the state as a whole. The Ministry is working with relevant departments to study and formulate relevant management policies, and the state will guide all localities to carry out cross-border carbon trading in an orderly manner in accordance with the "Opinions of the Communist Party of China on Accelerating the Construction of a National Unified Market" and the relevant requirements of the Paris Agreement.From the above responses, it can be seen that the Ministry of Ecology and Environment has been formulating relevant management policies to coordinate the management of all entities involved in international carbon trading, which must include voluntary emission reduction standards such as VCS and GS. So where will these standards go after the state establishes this system?COP28 High-end Interview丨In response to global climate governance, CCER, carbon finance and other topics, the relevant person in charge of the Climate Department of the Ministry of Ecology and Environment was interviewed by 21st Century Business Herald.
We all know that the reason why voluntary emission reduction standards exist is because there are many rules and regulations for carbon credits in the mandatory carbon market, whether it is account opening or trading, and if you are not an emission control company, it is very troublesome to operate.
In fact, the entire development process of voluntary emission reduction standards does not require any permission from the world's leading institutions. Therefore, a large number of VCS and GS projects in China are sold abroad, and there is no regulatory channel at the national level. Although the types of carbon credits that can be used for NDC have not yet been fully defined, and the carbon emission reductions sold may not affect NDC, there is a certain risk of leaving these carbon credits abroad, so there is the above-mentioned "overall management".
As for the overall management method, the Ministry of Ecology and Environment did not give any further explanation in the interview. My guess is that the most basic requirement is to report to the competent authority, or to force the transaction to go through a domestic exchange.
Another possibility is that the tax on buyers may be the same as the previous CDM policy, as many other countries are in the process of developing similar policies. Judging from the current news in other countries, the tax rate will be between 10% and 20%.
Of course, there is also a possibility, that is, it will not be sold at all, which is what everyone does not want to see, but there is a possibility.
This reminds me of an earlier case where Chinese and South Korean companies worked together to build a wind farm in China. Later, South Korea set up its own carbon market, and wanted to issue the part of the emission reductions that belonged to its own shares and bring them back to China. Because it is a CDM project, if you want to issue it, you need to get the LOA (approval document) of China's **. But the Chinese authorities just didn't sign it, the reason seems to be that China has NDC, and domestic carbon emission reduction is not allowed to be exported or something, and in the end the matter is not settled. From this point, it can be seen that the competent authorities are generally cautious about China's carbon emission reduction.
However, as I said in my previous article "If China wants to become a global carbon trading center, it can't first abandon its martial arts", if China wants to become a global carbon trading center, an open carbon trading environment is the foundation of the foundation, including the ability of China's carbon assets to be sold abroad, and the ability of foreign carbon assets to enter China and be used in China's NDC. To sum up, I think the overall management of cross-border carbon trading is necessary, but I hope that while the overall management can also be comprehensively considered for the international development of China's carbon market, and lay the foundation for China to become a carbon trading center in Asia and even the world.
*: Lao Wang talks about carbon neutrality.
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