At the end of August, once the "Opinions on Promoting Green and Low-Carbon Transformation and Strengthening the Construction of the National Carbon Market" (hereinafter referred to as the "Opinions") was released, it quickly attracted widespread attention from all sectors of society. This is the first systematic deployment at the central level for promoting the construction of the national carbon market, clarifying the overall goals and work paths for future development, and sending a long-term policy signal for carbon market construction to society. Experts pointed out that the release of the "Opinions" marks that the national carbon market is about to enter a new stage of transformation, moving towards a direction with diversified market entities, improved market mechanisms, a complete support system, and comprehensive regulatory strength.

By 2027, the industrial sector will be basically covered, and the petrochemical industry is about to join.

According to the "Opinions," by 2027, the national carbon emission trading market will basically cover the main emission industries in the industrial sector, and the national voluntary greenhouse gas emission reduction trading market will achieve full coverage of key areas. The "Opinions" also propose to orderly expand the coverage of industries and types of greenhouse gases based on industry development status, contributions to carbon reduction and pollution control, data quality foundation, and carbon emission characteristics.

In this regard, several interviewees stated that considering the requirements for orderly expansion and the contribution to carbon reduction, the inclusion of the petrochemical industry into the national carbon market is approaching.

"The carbon market is driving the transformation and upgrading of industrial structure," said Wang Haiqin from the Resource and Environmental Policy Research Institute of the Development Research Center of the State Council. As the national carbon market gradually expands, the total covered carbon emissions approach 70% of the country's total carbon emissions. Key emission enterprises within these industries will develop new green market competitiveness by extensively using renewable energy, improving energy efficiency, developing raw material substitutes, and deploying digital management and control technologies, thereby driving the overall industrial structure transformation and upgrading.

Lai Xiaoming, Chairman of the Shanghai Environment and Energy Exchange, proposed that for the trading market, industry expansion means a rapid increase in the number of trading entities and a continuous rise in the total tradable quota, driving a leap in market scale. On the other hand, it promotes cross-industry quota circulation, allowing quotas to flow to enterprises with higher carbon emission efficiency or greater emission reduction potential, fostering a resource allocation mechanism characterized by multi-industry integration and cross-industry bidding.

Ma Jun, Director of the Public Environmental Center, suggested that the petrochemical industry should actively learn from and absorb existing excellent experiences to prepare early for entering the carbon market.

Combination of free and paid quotas stimulates carbon market vitality from multiple parties.

The "Opinions" break the existing carbon market operation mode dominated by free quota allocation and intensity control, proposing that by 2030, a national carbon emission trading market based on total quota control and combining free and paid allocation will be basically established.

Ma Jun from the Public Environmental Center told reporters that during the operation of the carbon market, challenges such as low activity and imperfect data quality and rule systems have been encountered, and its "potential" has not yet been fully unleashed, which deserves further exploration. Meanwhile, domestic and international development trends have raised high expectations for the national carbon market. Currently, China has less than five years to reach its carbon peak. The upcoming 15th Five-Year Plan will shift from dual energy consumption control to dual carbon emission control, with global climate governance and international development situations being complex and intertwined.

Ma Jun further pointed out that free quota allocation dominated by quota intensity control was based on the early stage of national carbon market construction and the need to reduce enterprise pressure. Now that the national carbon market has entered a stable operation stage, and many heavy emission industries or enterprises have peaked or are close to peaking, continuing this approach is insufficient to motivate enterprises. A combination of free and paid quota allocation, with an orderly increase in the proportion of paid allocation, helps strengthen enterprises' awareness that "carbon emissions have costs, and carbon reduction has benefits," promoting enterprises' carbon trading behavior to shift from passive compliance to active management and strategic allocation. Meanwhile, total quota control facilitates alignment with the dual carbon emission control actively implemented in the 15th Five-Year Plan, providing favorable conditions for future carbon reduction work.

To enhance market vitality, the "Opinions" also deploy measures to enrich the levels and trading elements of the carbon market. According to Lai Xiaoming, while continuously expanding key industries, China will steadily promote the participation of qualified financial institutions such as banks and securities companies in trading, timely introduce professional traders, funds, trusts, and other non-compliance entities, gradually forming a multi-entity participation and multi-level market collaborative evolution pattern, driving more complex demand structures and diversified trading behaviors. The "Opinions" also explicitly support financial institutions represented by banks to carry out carbon pledge financing, improve policies and systems such as carbon pledges and carbon repurchases, reflecting the policy level's high attention to enterprises' practical needs for carbon asset financing, helping enterprises activate carbon assets, convert carbon assets into low-carbon development funds, and greatly stimulate enterprises' motivation for low-carbon transformation.

Establish a reasonable pricing mechanism to accurately release market signals.

Carbon price is hailed as a "barometer" reflecting the scarcity of carbon emission resources. It is understood that currently, due to the limited coverage of the national carbon market, the carbon price cannot fully reflect the actual market supply and demand.

"Giving full play to the main role of the carbon pricing mechanism will drive industrial upgrading through price signals," said an expert from the South China Environmental Science Research Institute of the Ministry of Ecology and Environment. The national carbon market can make the carbon price truly reflect the marginal cost and social value of emission reduction, allowing clear, stable, and reasonable carbon price expectations to help enterprises assess carbon reduction costs and benefits, guide financial resources, technical talents, and other production factors to accelerate the flow from traditional high-carbon industries to clean and low-carbon fields, with capital resources more inclined to invest in low-carbon technology R&D, technology resources shifting from end-of-pipe treatment to source prevention and control, and labor resources moving from traditional manufacturing to green services. The market-oriented allocation of factors and resources guided by carbon price signals is becoming a new ecology of the unified national market, helping achieve industrial structure iteration and upgrading towards green and low-carbon.

"Carbon pricing is stimulating technological innovation," said Wang Haiqin. Carbon pricing endows green and low-carbon technologies with market value, incentivizing enterprises, research institutes, and others to continuously iterate and upgrade in a market-oriented investment-return economic cycle, forming and strengthening technological leadership in the green and low-carbon direction.

Notably, the "Opinions" explicitly emphasize forming a carbon pricing mechanism with reasonable price levels. In this regard, Yin Jun from the Carbon Emission Rights Registration and Settlement (Wuhan) Co., Ltd. stated that the stability of carbon prices directly affects the effectiveness of market incentive mechanisms. Establishing an open and transparent quota reserve and market regulation mechanism can timely release or reserve quotas when market imbalance risks occur, preventing irrational carbon price fluctuations and effectively avoiding uncontrolled compliance costs for enterprises. By constructing stable anchors for price discovery and strong price expectation signals, enterprises are micro-level compelled to incorporate carbon costs into full lifecycle management, guiding emission reduction and maintaining stable market operation.

Additionally, Wang Haiqin mentioned that carbon finance will become an important financing mechanism for green and low-carbon development. Carbon emission quotas are natural financial products. Developing the carbon finance market can help compliance enterprises reduce economic risks and is also an important measure to improve the carbon market price formation mechanism. Developing carbon finance can guide funds to invest in green and low-carbon projects, provide more financial support for the green and low-carbon transformation of the economy and society, and reduce the risk of stranded assets and asset bubbles caused by excessive capital allocation in high-carbon industries.

Source: China Chemical Industry News