What is the Emissions Market?

Emissions trading refers to the trading of emissions of major pollutants such as sulfur dioxide and chemical oxygen demand, and greenhouse gases such as carbon dioxide. The most well-known domestic emission trading companies are Tianjin Emissions Exchange, Beijing Environment Exchange and Shanghai Environment and Energy Exchange. The implementation and continuous improvement of the CDM mechanism have promoted the gradual formation of a global carbon trading market. More and more developed and developing countries have begun to pay attention to the clean development mechanism. As the world s largest developing country and a large carbon supplier, China actively participates in CDM projects, undertakes international emission reduction tasks, and makes its due contribution to improving the world s climate.

Climate change caused by greenhouse gases not only affects the prosperity and development of countries, but also threatens the ecological environment on which human beings depend. Climate warming has become a major problem that the international community needs to solve urgently. The most important factor restricting environmental governance is economic development. How to unify the goals of environmental governance and economic development has become the focus of many scholars' research. The introduction of the emission trading theory has solved this problem for scholars and policy makers, and it has become a reality to use economic methods to solve environmental pollution problems. A mature carbon trading market can bring huge economic and ecological benefits, and is of great significance in promoting social energy conservation and emission reduction and maintaining harmonious economic and environmental development. China's carbon emissions trading market can be divided into domestic and foreign markets according to the trading targets. The domestic market refers to the regional market formed by the seven domestic carbon emissions trading pilots. The foreign market mainly refers to the transaction market formed by the CDM projects in which China participates and buyers in developed countries. The amount of carbon dioxide reduced by domestic companies can be sold on the international market, purchased through international carbon funds or related companies participating in the World Bank and other institutions, and entered the markets of developed countries. China has now become the world's largest carbon supplier country, but the pricing power of carbon emission rights is firmly controlled by western developed countries. This also reflects from the side that there are major problems in China's carbon trading market. Although China is the largest seller in the CDM market, with a turnover of about 60% of the world's total, compared with the EU, China's carbon market is still in its infancy, and the development of pilot carbon exchanges is also worrying. In response to the existing problems, they suggested that the country should try to expand the influence of carbon finance, establish a unified carbon emission trading platform, strengthen the financial industry's support for CDM projects, and improve the legal framework of carbon finance. China has not yet formed a sound carbon emission right. In the trading market, China s carbon trading market is only focused on CDM projects. It lacks other carbon financial derivatives and is not able to interface with the international carbon trading market. It lacks effective measures to stimulate companies to participate in carbon trading. There are also many problems in the development of the domestic carbon trading market. In 2013, China began a pilot operation of carbon trading, and seven major carbon emission exchanges, including Shenzhen and Shanghai, were successively established and put into operation. Statistics show that the domestic carbon trading market's trading volume and trading volume do not truly reflect China's huge emission reduction potential, and the market is relatively volatile and the trading mechanism is not sound. Liu Liwei and Zhang Zewen believe that the prominent domestic market segmentation, low participation of market players, and lack of pricing mechanisms have seriously affected the expansion of market transaction volume and the formation of a unified price market. The development of China's carbon emission trading market In the process of improvement, there are still many problems, which are analyzed from the perspective of macroeconomics and microeconomics. They believe that the main problems are in government supervision, the lack of an initial allocation system for emissions rights, and the irrational pricing of carbon emissions trading. An analysis was made of the Beijing carbon trading pilot market. In 2014, Beijing's carbon emissions trading work steadily advanced, and the trading volume and trading volume were relatively stable. However, although Beijing is the first to take the first step in the pilot of carbon emissions trading, it faces many arduous tasks. One of the biggest challenges is the regulatory challenge. There are many industries involved in carbon emission trading, and it is very difficult to regulate the pilot supervision of carbon trading. With the development of technology and economy, the detection of emissions and the supervision of the government have been further improved, but we have to face new problems. In order to participate in carbon emissions trading, companies must first obtain carbon emission quotas. In addition to the free allocation of the state, enterprises need to obtain them through auctions or their own emission reduction methods. However, everything behind them can not be separated from the investment of corporate funds. This undoubtedly adds a large financial burden to the enterprise, and no one dares to act easily when the policy is unclear ^[1]

The implementation and continuous improvement of the CDM mechanism have promoted the gradual formation of a global carbon trading market. More and more developed and developing countries have begun to pay attention to the clean development mechanism. As the world s largest developing country and a large carbon supplier, China actively participates in CDM projects, undertakes international emission reduction tasks, and makes its due contribution to improving the world s climate. In order to better achieve the goal of energy conservation and emission reduction, the Chinese government has set up a special management agency for the CDM, promulgated management measures, created a clean development mechanism fund, and related service agencies-consulting companies, review agencies, Reporting service agencies, middlemen, and investors have also been established. Carbon trading markets around the world have gradually formed, with a steady increase in trading volume and trading volume. Relevant data show that the carbon trading market is expected to surpass the oil trading market and become the world's largest international trading market. Chinese real economy companies have participated in many CDM project transactions, creating a large amount of emission reductions for the international carbon market. In 2009, the transaction volume of certified emission reductions generated by Chinese CDM projects accounted for 84% of the world. Although China has considerable carbon emission reductions, the lack of bargaining power in external CDM transactions makes it difficult for domestic companies to obtain corresponding profits and development space from the transactions. Foreign buyers mainly lock in future carbon emission price prices by signing long-term contracts with Chinese sellers, which limits the right of domestic companies to maintain hedges and hedge market risks. After the certified emission reductions were purchased by developed countries at low prices, they were packaged and developed into higher-priced financial products and derivative products for trading. For example, the spot price of CERs sold to European buyers in June 2009 was around 11 euros / ton, while the same EU quota futures price which expired in December 2014 was 19 euros / ton.

The widespread smog in China has forced the government and related departments to put air pollution control on the agenda. The main components of carbon dioxide and atmospheric pollutants PM2.5 (sulfur dioxide and nitrogen oxides) are mainly derived from the combustion of fossil energy sources such as coal, oil, and natural gas. The two have the same origin. Through carbon emissions trading, the reduction of carbon dioxide emissions At the same time, air pollutants such as sulfur dioxide, nitrogen oxides, PM10, PM2.5 can be reduced accordingly. Environmental issues caused by carbon emissions have become the focus of everyone's attention, and the control of total energy consumption has become a global consensus, which has led to the rapid development of the carbon trading industry worldwide. As a large greenhouse gas emitter, China has begun to establish a carbon trading system and actively launch carbon emissions trading pilots. The aim is to adjust the total greenhouse gas emissions through market mechanisms to achieve energy conservation and emission reduction, while controlling the emission of polluting gases in the atmosphere. Natural air for everyone. At present, China's economic and social development is facing constraints from resources and the environment. At the same time, it is facing unprecedented pressure to cope with climate change globally and enhance carbon dioxide emission reduction. China has a strong demand for strengthening the low-carbon transition and development of its economy and society. At the same time as rapid economic development, significant achievements have been made in energy conservation and emission reduction.

The research on emission rights theory in China began in the 1980s. The development of domestic carbon emission rights trading theory is not mature enough. The pilot work on emission rights transfer under the unified organization of the State Environmental Protection Administration began in the 1990s. Provinces and cities-Beijing, Tianjin, Shanghai, Chongqing, Guangdong, Hubei, and Shenzhen started carbon trading pilots. China's emissions trading market has made great progress since its establishment, and the activity of the secondary market has gradually increased. According to the established and running Shenzhen Emission Exchange, Beijing Environmental Exchange, Shanghai Environmental Energy Exchange, The carbon emissions trading volume and transaction statistics, such as the Tianjin Emissions Exchange, are plotted. Shenzhen launched the country's first carbon emission trading market on June 18, 2013, becoming a leader in China's environmental rights trading market.

The trading volume of the Shenzhen carbon trading market is much higher than that of other domestic trading markets, which is inseparable from the history of Shenzhen securities trading and Shenzhen's earliest establishment of a carbon emissions exchange in the country. Trading has accumulated a wealth of experience. Due to the high turnover of the Shenzhen carbon trading market, the image cannot show the changing trend of the trading volume of other trading markets. The transaction volume of the Shanghai, Beijing, Tianjin, and Guangzhou trading markets is excluded when the trading volume of the Shenzhen carbon trading market is excluded. The analysis of the volume data shows that the trading changes of the carbon exchanges have converged, and all reached the peak period of trading in June and July ^[2]

China has huge carbon emission resources. According to the statistics of the United Nations Development Program, China's carbon emission reduction has accounted for about 1/3 of the global market, ranking second in the world, and the prospects for the development of carbon trading and its derivative markets are broad.

However, the development of carbon trading theory and practice in China started late compared with developed countries and the progress was slow due to complex national conditions, so that a mature trading system was not formed. The carbon trading rules and prices in the international market are mainly set by carbon demand parties such as large foreign carbon markets, financial institutions, and emission reduction entities. Domestic carbon emission sellers do not have good channels to obtain relatively fair carbon trading information. Although the National Development and Reform Commission has begun to control the price of CDM projects, international carbon trading is dominated by the buyer's market. As a supplier of CDM projects, China is at the lowest end of the global carbon trading industry chain, with insufficient pricing power and bargaining power, and domestic certification. The price of emission reductions has been depressed for a long time, which has caused China to provide large amounts of emission reductions to developed countries while also providing huge economic benefits. In the global wave of energy conservation and emission reduction, any action by China in carbon emission reduction and carbon trading will have a significant impact on the international carbon trading market, and countries around the world are also closely watching when China's peak carbon emissions will arrive. However, because China's carbon trading market is not mature enough, no corresponding price system has been established, nor can the fairness, fairness, and openness of the trading market be achieved. For many reasons, the transaction price is significantly lower than the international carbon market price. Relevant data show that the price of carbon trading in China is 2-3 euros less per ton than India, and less than half of the price in the European secondary market.

While the carbon emissions trading market is becoming more active and gradually formalizing, we should also see problems that arise during the operation of the pilot trading. After the carbon emissions trading pilot was run, the trading volume of some exchanges was relatively small and accompanied by relatively large fluctuations in trading volume. Even in some months, even if there was trading volume, it was very unstable. No transactions occurred in most of the month. The carbon trading market is relatively volatile and is still in its infancy, and needs to be further improved. Due to policy and technical issues, the seven pilot regions have not yet achieved interconnection, and they are still a fragmented market. The government should step up its efforts to build a unified national carbon emissions trading market to promote the flow of full carbon quotas. After the carbon trading was officially launched in the pilot areas, many companies maintained a wait-and-see attitude. The main reason may be that the implementation of this policy has greatly increased the financial burden of enterprises. Companies participating in the carbon trading market obtain emission rights through auctions or their own emission reductions. Enterprises need a lot of financial support to purchase new equipment or improve emission reduction technology, improve fuel efficiency, and improve energy consumption structure and energy. For some companies with weak economic strength, purchasing carbon emission rights, purchasing equipment, and improving technology have placed an excessive financial burden on their normal operations. During the initial period of trial operation, some cases of emissions trading were also led by the local government or environmental management department. Point-to-point negotiated pricing was implemented. The company did not participate in the transaction as a real market entity, and the level of administrative intervention was large. The demand for emission rights trading correctly reflects the value of resources, lacks the leading role of market mechanisms, and cannot achieve the purpose of internalizing the externality of environmental pollution issues through price transmission. Moreover, due to local protectionism, the government may forcibly prohibit local companies from transferring emission indicators to other regions, and the government-led emission trading market usually also generates a "power rent-seeking" phenomenon. Compared with the established operating systems and formal trading markets in the United States and the European Union, China's emissions trading market is still in its infancy and lacks detailed rules and regulations and legal supervision. Far away. The economic system that has not yet been completely transformed makes government and enterprise indistinguishable. Excessive administrative intervention is difficult to form a unified national trading market, and it is also unable to effectively connect with international markets. Therefore, it is necessary to deeply study the implementation framework and operation details of emissions trading in the current context of energy conservation and emission reduction to promote the process of market-oriented allocation of environmental resources. With the establishment of a secondary market for emissions trading and the development of an international carbon trading market, the domestic carbon trading market is gradually maturing, and the market with a market-oriented mechanism is no longer in the foreseeable future. In the early stage of the operation of emission trading, not only the government's setting of the total amount and distribution method, but also the operation of the trading market also requires the government to conduct corresponding supervision and regulation. Lead to fluctuations in the product supply market. However, under the market economy system, the government's supervision must be appropriate. When the emissions trading market is mature enough, the government should appropriately decentralize and market, make full use of the market mechanism to adjust the price of emissions rights to manage environmental issues, and excessive supervision will instead Will hinder the normal operation of the market mechanism.

China is in a critical period of economic system transformation. Economic development is an important goal of the government. The focus of government work is to optimize the industrial structure, change the direction of development, and promote energy conservation and emission reduction in various industries. However, it is difficult to develop the economic governance environment. Heavy. China's existing carbon trading is mainly for CDM projects in the European carbon trading market. However, as the world's largest carbon supply country, China is in the position of a price receiver in carbon pricing in the international market. Due to the asymmetry of information, it has allowed EU countries to purchase emission reductions at low prices and then package and sell to earn huge profits. . Most of this is due to China's imperfect carbon trading market. The government has not provided an effective platform for participating companies to obtain sufficient transaction information to understand the transaction market to set a reasonable sale price. The two carbon emission trading markets are actually closely connected. A reasonable and efficient domestic carbon emission trading market can provide a basis for domestic companies to participate in the international carbon emission trading market for price negotiations. At the same time, a fair and equitable international carbon emission trading market will also It has an impact on the pricing of the domestic carbon emission trading market, and the timely transmission of prices plays an inestimable role. In order to gain the right to speak in the international carbon emission market, and to obtain the interests that should belong to Chinese companies, it is urgent to promote the development of the domestic carbon emission trading market.

While conducting theoretical and practical research, the Chinese government is also required to establish relevant departments to manage the low-carbon economy and formulate corresponding laws, regulations and rules to maximize the trading behavior of the carbon emission trading market. At the same time, the government also needs to build an open, A fair and just trading platform to increase the transparency of emissions trading market information, reduce transaction costs, and increase the activity of the secondary market for carbon emissions rights. Since a certain amount of carbon emission mechanism is adopted to reduce carbon emissions, relevant departments need to design how to formulate the "total amount" and the factors that affect the total amount; the government should also detect the amount of pollutants discharged by polluting enterprises. If the emissions detection is not in place and the emissions of the company cannot be accurately measured, then the company will not comply with the established emission rules, lack the pressure and motivation to improve the emission reduction technology and reduce the amount of emissions, and will not go to the emissions trading even if the emissions rights are insufficient. Purchasing pollution indicators in the market. If this is the case, the emissions trading market will not exist in the near future, and these national policies on emissions rights will not play any role.

At the same time, the state's assessment indicators for local governments should also be changed. They can no longer be the dominant economic indicators, and they should implement a variety of evaluation indicators. If we blindly rank by economic indicators, it will only stimulate local governments to indulge some enterprises with excessive emissions in order to introduce foreign capital to develop the local economy, which will lead to the failure of the central government to better implement. When constructing a unified national carbon trading market, the experience of the pilot regions cannot be directly used. We must learn the lessons of the construction of the stock trading market. After all, the unified national market is still different from the pilot regions. China needs to be considered. Great differences between districts. At the same time, the government is required to guide enterprises to fully understand the value of carbon emission reduction resources. Carbon emissions trading is a complex and systematic project. It is not only a major mechanism innovation to promote energy conservation and emission reduction, but also an important part of promoting the development of "carbon services" -related industries and carbon financial markets. In order to build a fair and effective emission trading market, the state should adhere to the fairness, rationality, and effectiveness of primary market distribution, and at the same time, it should properly guide the implementation of pilot operations. The government can regulate market activities by formulating corresponding laws and regulations and reasonable trading rules, including the procedures of transactions, the regulation of breach of contract during the transaction, etc .; some companies will also not arbitrarily emit carbon emission quotas, and excessive emissions will reduce the carbon trading market. In order to curb the excessive emissions of enterprises, the government can implement strict monitoring on carbon-emitting enterprises and formulate stricter punishment measures to increase the cost of violations of enterprises, alerting enterprises to discharge according to quotas, and high environmental costs can also promote Enterprises are accelerating the transformation of production modes and operating methods that produce pollution.

To promote the development of a low-carbon economy and achieve greenhouse gas reduction targets, EU member states have established several national carbon funds. Commercial banks have implemented the Equator Principles, promoted green credit, developed low-carbon technologies, fostered low-carbon projects, and developed low-carbon industries. Such as providing financing services, these are all worth learning and learning from China (Sudan et al., 2013). The main body participating in carbon emission trading is carbon emission enterprises, and the trading volume and trading activity of the market are realized by them. While considering the formulation of market mechanisms and trading systems, we should also consider more from the corporate side. In order to facilitate the implementation of the policy, the government or relevant departments need to issue some financial policies directly to support carbon emission companies while guiding enterprises to participate in carbon emission trading, and improve carbon emission trading through commercial banks. Market transactions. Drawing on the development of carbon emission trading markets in developed countries, and combining the situation that domestic carbon finance and carbon markets do not want to match, China should actively develop carbon financial markets and vigorously innovate carbon financial derivatives to promote carbon trading markets in the early stages of the operation of carbon emissions trading markets. The development of the carbon financial market supporting it must also operate to achieve the optimal allocation of carbon emissions environmental capacity resources. Carbon finance has become the key to national society to seize the commanding heights of low-carbon economy and low-carbon finance. From the development experience of these countries, the carbon trading system can effectively broaden the scope of financial services and improve the financial service system. Carbon emission enterprises also need financial support from relevant financial institutions in the early stage of participating in carbon emission trading. With the gradual maturity of the carbon trading market, a series of carbon financial products such as carbon sink financing projects, carbon sink wealth management products, carbon sink option futures trading have emerged, which has greatly promoted the innovation of financial products and the diversified development of financial markets. The role requires domestic financial companies to better manage carbon finance. Since 2007, Hebei Province's environmental protection departments and financial institutions have jointly promoted green credit, implemented credit control for enterprises and projects that did not comply with industrial policies and environmental laws, and used green credit mechanisms to curb the blind expansion of high-energy-consuming and high-polluting industries. Driven by local government agencies conducting pilot emissions trading transactions, more and more banks and financial institutions are participating in the domestic carbon financial market to achieve a win-win situation among companies, governments and banks. Recently, Industrial Bank has also developed carbon quota pledged financing products according to the development of the Hubei carbon market and related institutional arrangements. It can continue to develop financial derivatives such as options, futures related to emissions rights, or green loans, green financing, Financial services such as low-carbon wealth management products and green credit cards make full use of the role of carbon trading between financial capital and the real economy to attract more institutions to participate in the carbon market, enabling companies to effectively activate carbon quota assets and stimulate the domestic emissions market To provide enterprises with a low-cost market-oriented emission reduction path, the state should also guide enterprises to effectively manage their carbon quotas and increase their liquidity. If some high-pollution and low-capacity companies are supported in reducing their loan policies, some companies with good technology and high resource utilization rates will be given preferential loan policies to promote a good atmosphere of energy conservation and emission reduction in the whole society, which can effectively promote emissions trading. Carry out. A positive and healthy domestic emissions trading market can provide a reference for domestic companies to participate in the pricing of international emissions trading. The fluctuation of carbon trading in the international market can also promote the development of the domestic carbon trading market through price transmission. Only the healthy development of domestic and international markets can integrate environmental governance, climate improvement and economic development to achieve the optimal allocation of carbon emissions and environmental capacity resources, otherwise it will affect the sustainable development of human society.