[Green Development] Carbon Emissions, Carbon Sinks, CCUS, CER, Carbon Trading, Complete Carbon Knowledge

Release Date:

2021-05-08 14:48

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1. What is carbon emission?

Carbon emission is the process by which human production and business activities release greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, etc.) into the environment.

Carbon emissions are currently considered one of the main causes of global warming. The largest source (54%) of carbon emissions in China comes from the combustion of fossil fuels in the power and heating sectors during production.

2. What is carbon peak?

Broadly speaking, carbon peak refers to the point in time when carbon dioxide emissions stop increasing and reach their peak, then gradually decline. According to the World Resources Institute, carbon peak is a process, where carbon emissions first enter a plateau phase with some fluctuations within a certain range, followed by a steady decline phase.

Carbon peak is a prerequisite for achieving carbon neutrality. Achieving carbon peak as early as possible can promote the early realization of carbon neutrality.

Based on this, and considering China's committed timeline: 1) From now until 2030, China's carbon emissions will still be in a climbing phase. 2) Between 2030 and 2060, carbon emissions will pass through a plateau phase and ultimately complete the emission reduction task.

3. What is carbon neutrality?

Carbon neutrality refers to enterprises, groups, or individuals calculating the total amount of greenhouse gas emissions they directly or indirectly produce within a certain period, and then offsetting their own carbon dioxide emissions through activities such as afforestation and energy conservation to achieve "zero carbon emissions."

4. What is a carbon sink (Carbon Sink)?

Carbon sink generally refers to the process, activity, or mechanism of removing carbon dioxide from the air. It mainly refers to the amount of carbon dioxide absorbed and stored by forests, or the capacity of forests to absorb and store carbon dioxide.

Research data shows that China's carbon sink capacity has gradually increased. Through vigorous cultivation and protection of plantations, from 2010 to 2016, China's terrestrial ecosystems absorbed about 1.11 billion tons of carbon annually, absorbing 45% of the anthropogenic carbon emissions during the same period. It is evident that forestry carbon sinks play an important role in the vision of carbon neutrality, and carbon sink projects will help China achieve its carbon neutrality goals.

5. What is Carbon Capture, Utilization, and Storage (CCUS)?

Carbon Capture, Utilization, and Storage, abbreviated as CCUS, is a technology that captures and purifies carbon dioxide emitted during production processes, and then recycles it in new production processes or stores it. Carbon capture refers to collecting carbon dioxide emitted from large power plants, steel mills, cement plants, and other sources, and storing it by various methods to prevent its release into the atmosphere.

This technology has the synergistic effect of achieving large-scale greenhouse gas reduction and low-carbon utilization of fossil energy, and is one of the important technological options for the global response to climate change in the future.

6. What is a carbon emission right (CER)?

Carbon emission rights, originate from Certified Emission Reduction (CER). In 2005, with the entry into force of the Kyoto Protocol, carbon emission rights became an international commodity. The subject of carbon emission rights trading is called "Certified Emission Reduction (CER)."

Where do emission rights come from? Both primary and secondary quota markets coexist. 。

1) The primary market is generally the market where provincial development and reform commissions initially allocate quotas, divided into free allocation and paid allocation.

Among them, paid allocation includes a bidding mechanism, following the principles of paid quotas and equal rights and prices, conducted through a closed bidding process.

2) The secondary market is where emission-controlled enterprises or investment institutions conduct trading.

7. What is carbon trading?

Carbon trading refers to treating carbon dioxide emission rights as a commodity, where buyers obtain a certain amount of carbon dioxide emission rights by paying sellers a certain amount of money, thus forming a trade of carbon dioxide emission rights.

The carbon trading market is artificially created by the government through controlling emissions of energy-consuming enterprises. Usually, the government sets a total carbon emission cap and allocates carbon emission quotas to enterprises according to certain rules. If an enterprise's future emissions exceed its quota, it needs to purchase quotas from the market. At the same time, some enterprises that reduce emissions through energy-saving technologies and ultimately emit less than their allocated quotas can sell the surplus quotas through the carbon trading market. Both parties generally trade through a carbon emission exchange.

In the first case, if the cost of emission reduction for an enterprise is lower than the carbon trading market price, the enterprise will choose to reduce emissions, and the reduced amount can be sold for profit.

In the second case, when the cost of emission reduction is higher than the carbon market price, the enterprise will choose to purchase quotas from the government, enterprises, or other market entities that hold quotas in the carbon market to meet the emission reduction targets set by the government. If the enterprise fails to purchase enough quotas to cover its actual emissions, it will face high fines.

Through this set of designs, The carbon trading market internalizes carbon emissions as part of enterprise operating costs , and the carbon emission price formed by trading guides enterprises to choose the most cost-effective carbon reduction methods, including energy-saving and emission reduction transformation, carbon quota purchase, or carbon capture, etc. , the market-oriented approach ensures that while the industrial structure transitions from high energy consumption to low energy consumption, the overall social emission reduction cost remains optimized.

8. What are carbon emission quotas and voluntary emission reductions (CCER)?

According to the classification of carbon trading, China's carbon trading market currently has two basic products, one is the carbon emission quota allocated by the government to enterprises, and the other is the Certified Emission Reduction (CCER).

The "Measures for the Administration of Carbon Emission Rights Trading (Trial)" issued in December 2020 states that, CCER refers to the quantified and verified greenhouse gas emission reductions from projects such as renewable energy, forestry carbon sinks, and methane utilization within China, which are registered in the national greenhouse gas voluntary emission reduction trading registration system.

The first type, quota trading, is a policy tool adopted by the government to achieve emission control targets, that is, within a certain space and time, the emission control target is converted into carbon emission quotas and allocated to lower-level governments and enterprises, if an enterprise's actual carbon emissions are less than the quota allocated by the government, the enterprise can trade the surplus carbon quotas to achieve reasonable allocation of carbon quotas among different enterprises, ultimately achieving emission control targets at relatively low costs.

The second type, as a supplement, introduces voluntary emission reduction market trading outside the quota market, namely CCER trading. CCER trading refers to emission control enterprises purchasing certified volumes from enterprises implementing "carbon offset" activities to offset their own carbon emissions.

"Carbon offset" refers to activities used to reduce greenhouse gas emission sources or increase greenhouse gas sinks to compensate or offset greenhouse gas emissions from other sources, meaning that the carbon emissions of emission control enterprises can be offset by non-emission control enterprises using clean energy to reduce greenhouse gas emissions or increase carbon sinks. Offset credits are issued after emission reductions are achieved through specific reduction projects, including renewable energy projects, forest carbon sink projects, etc.

The carbon market grants CCER a 1:1 substitution ratio for carbon emission quotas, meaning 1 CCER is equivalent to 1 quota and can offset the emission of 1 ton of carbon dioxide equivalent. The "Measures for the Administration of Carbon Emission Rights Trading (Trial)" stipulate that key emission units can use national certified voluntary emission reductions to offset the settlement of carbon emission quotas each year, and the offset ratio shall not exceed 5% of the carbon emission quotas to be settled.

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In recent years, with recognition and support from relevant national ministries and many provincial and municipal authorities, United Intelligence has provided green development and carbon neutrality system solutions and implementation for many local governments, industries, parks, and enterprises, including Beijing Benz and more than 20 automobile manufacturers, pharmaceutical manufacturing, multiple development zone management committees, and the National Internal Combustion Engine Industry Association, achieving remarkable results and widespread acclaim.

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