To what extent can excessive carbon emissions be held accountable through carbon allowance trading or carbon tax and support large-scale investment in emission reductions is a very important issue, and this equilibrium price can only be achieved at the aggregate target. balance out.
The topic of carbon peaking and carbon neutrality is very important, and I was involved in this discussion a long time ago because of some accidental factors. Now I hold the title of Boao Forum for Asia. The Boao Forum for Asia has always paid attention to the issue of global climate change, especially the realization of the "30.60" carbon goal.
Comrade Zhu Jun and Ma Jun spoke very well. In particular, it is very meaningful to discuss green finance and carbon emissions together, and I am also very inspired. I would like to take this opportunity to focus on the realization of the "30.60" carbon target, which requires further clarification of the relevant total target.
The "30·60" carbon target reflects my country's important transformation in the field of carbon emissions
As early as when he was working in Zhejiang, President Xi Jinping put forward the scientific conclusion that "lucid waters and lush mountains are invaluable assets"; after serving as general secretary and state president, he has repeatedly emphasized and practiced this scientific concept, which has also reversed my country's global reputation in the past. position on climate change. As we all know, before this, my country's attitude towards climate change was relatively negative, mainly emphasizing that economic growth should not be suppressed, and that as a developing country, China should not commit to binding hard targets. In September 2020, President Xi Jinping proposed China's "30·60" carbon goal at the United Nations General Assembly, making China's commitment internationally. This is an important change worthy of deep understanding and implementation. This change is not a fine-tuning of presentation or a continuation of policy updates, but a change in concept, understanding, and position, which requires us to deeply study and understand, and put into practice for a long time to come. At present, there is still a big gap in the implementation of our actions. For example, domestic coal power projects have shown a strong momentum of expansion in the past two years, and some international coal power projects related to the "Belt and Road" still have China's financing. participate. All this shows that it is not an easy transition process to deeply understand and implement the "30.60" carbon goal.
In addition, China's climate change work, including the construction and implementation of a green financial system, faces a series of major challenges. One of the first challenges is to have a clearer and more transparent aggregate indicator system to achieve carbon goals. This is very important, because it can make all parties have a clear understanding of carbon goals, and can also help many related work. Provide measurable, calculable, and testable tasks. Of course, this is also not easy to achieve, and all relevant departments need to work actively to truly realize the transformation of ideas, understandings and actions, and to promote reliable measurement of carbon emission data and targets in an open and transparent manner. achievement of carbon targets.
Achieving the carbon target requires a clear premise of the total carbon emission target
At the Climate Ambition Summit on December 12, 2020, President Xi Jinping further proposed several aggregate indicators for my country's response to climate change on the basis of the "30·60" carbon goal: by 2030, China's GDP per unit of Carbon dioxide emissions will drop by more than 65% compared with 2005, the proportion of non-fossil energy in primary energy consumption will reach about 25%, the forest stock will increase by 6 billion cubic meters compared with 2005, and the total installed capacity of wind power and solar power will reach 1.2 billion kilowatts Above, these correspond to carbon emission intensity, carbon sink and new energy development respectively.
The above aggregate targets are very important, because in the specific work of addressing climate change, many micro-quantitative indicators and data bases are needed, but the premise of determining micro-quantitative indicators is to have aggregate targets: with aggregate targets, can Clarify and decompose micro goals. The total target is also related to the work process arrangement of the "30·60" carbon goal. The work process needs to be balanced, neither too tight before and then tight, nor too tight before and then loose. In addition, the realization of the carbon target needs to rely on the incentive mechanism. It is not that the target task can be implemented as a result, and the incentive mechanism can only be calculated, set and improved on the basis of a clear total target. Some countries have already given clear quantitative targets in the total carbon emission control plan, and China also needs to make more transparent and readable measurement on the total carbon emission, in order to help all parties in the society understand and implement it into action.
There are two main ways to reduce carbon emissions, which act on both ends of the balance between supply and demand. One is to limit existing carbon emissions, similar to when the food supply was insufficient in the past, and residents relied on food stamp quotas, that is, to suppress demand; the other is to invest in the supply side to form a low-carbon or zero-carbon new energy supply. Achieve balance. I personally believe that in the next few decades, the realization of carbon emission targets will mainly rely on this kind of investment, and a large amount of investment should be used to promote the supply of new energy and enhance the use of energy saving and low carbon.
Now that an investment is required, future returns need to be calculated. Public investment may not require returns to a certain extent, but public financial funds are usually tight. Therefore, to vigorously promote private investment, it is necessary to clearly calculate the future return of investment, which requires clearer data on the total amount of carbon emissions each year in the future. , after all, the calculation of many micro-data indicators depends on the total target. In addition, the size of our future investments in achieving carbon goals should also correspond to the annual GDP, that is, what percentage of each year's GDP needs to be invested in addressing climate change.
Incentives for investing can come from two sources. One is to obtain and reflect returns through quota trading or carbon tax, that is to say, entities with high carbon emissions should hand over part of the funds to support emission reduction investments; the other is to guide investment in this direction through general mobilization. Additional policy compensation. I personally think that most of the investment incentives in the future should come from the first way. Therefore, it is a very important question to what extent we can make the behaviors of excessive carbon emissions, especially key industries and enterprises, take responsibility and support large-scale investment in emission reduction through carbon quota trading or carbon tax. This equilibrium price can only be balanced out under the aggregate target. At present, my country's carbon trading market is not unified enough, there is fragmentation, and carbon prices in different markets are inconsistent, which also brings many problems to pricing. Therefore, in order to achieve a consistent carbon price, it is necessary not only to have a clear total target, but also to achieve connectivity and unification of various carbon markets.
In the process of promoting carbon emission quota trading and carbon tax, there will be a cost transfer phenomenon, but this is unavoidable. If you consume more carbon-emitting energy, you must bear more costs. There will be more new funds to invest in emissions reduction and green finance. However, passing on too much may also increase inflationary pressures, and domestic residents may have opinions. The key to the problem of cost transfer is the appropriate amount of transfer, which involves the trade-off between multiple targets such as the total carbon target and the inflation target.
Part of future emission reduction tasks will depend on public investment, and the structure of public investment is a kind of resource allocation, because if this part of public investment is not used for carbon emission reduction, it can be used to provide public goods and welfare including medical care and social security. . Since it involves resource allocation, it is necessary to quantitatively clarify whether there is a gap between the multiple objectives of public investment and the expected goals to be achieved, and how big the gap is, so as to correct fiscal and other public policies, and plan the proportional relationship between public investment and private investment. .
As mentioned earlier, President Xi Jinping's international commitments to reduce carbon emissions represent an important transition in our country, and it is not easy to achieve this transition. In fact, a few years ago, the mainstream view on carbon emissions in China was to emphasize that development should not be affected by carbon emission reduction. The related quantitative arguments mainly emphasized the following three aspects:
First, we only talk about intensity and emphasize that carbon emission intensity should be correlated with GDP growth, which means that if China's GDP grows rapidly, then emissions can be higher.
Second, it emphasizes the mean value, that is, the concept of per capita emissions. China has a large population, and its per capita emissions are not much compared with those of Western countries, so there is more room for emissions.
Third, emphasize the accumulation, that is, the historical cumulative carbon emissions. The industrialization process of Western countries started very early and has already emitted a lot in history. From this perspective, China also has a large space for emissions.
These claims actually tend to resist cutting emissions. To put it mildly, it actually contradicts the goal of carbon neutrality by 2060. Because to achieve carbon neutrality by 2060, whether your economic growth is fast or slow, the population is large or small, the cumulative emissions scale is large or small, you need to achieve net zero emissions. Therefore, in practice, there is an urgent need to clarify the total carbon emission target, which requires all relevant departments to carefully understand, realize the transformation and keep up with the pace, so as to lay a solid foundation for achieving the carbon target and make a quantitative action plan. .
Accounting Basis for Total Carbon Emissions Target
At the Climate Ambition Summit, President Xi proposed my country's goals in terms of carbon emission intensity, carbon sinks and new energy, especially the first indicator on carbon emission intensity, that is, by 2030, China's carbon dioxide emissions per unit of GDP will be Compared with 2005, it has dropped by more than 65%, and the proportion of non-fossil energy in primary energy consumption will reach about 25%. This involves how to choose existing statistics and how to quantitatively plan for the future. However, due to the unrealistic accounting basis, including the lack of official authoritative statistics and important parameters, it is impossible to measure these indicators clearly.
First of all, there are several calibers of my country's total annual carbon emissions from 2005 to the present, all of which come from academic institutions and international cooperation projects, but it seems that no official authoritative data can be found. In terms of accounting, if we want to achieve a 65% reduction in carbon emission intensity in 2030 compared to 2005, we must first know what the carbon emission in 2005 was. On this data, we found that the figures are not consistent, and it is also related to who should be the authority provider. Some studies cited that China's carbon emissions in 2005 were about 7.8 billion tons. Considering that the forest carbon sink absorbed about 1 billion tons of emissions, the total carbon emissions in 2005 were at the level of 6.7-6.8 billion tons. If this data is accurate, combined with the GDP of the year, the target emission cap to be reached in 2030 can be roughly calculated. However, this total carbon emission data is not authoritative, just the words of a family. In 2005, the scale of China's carbon emissions cited in more literature was around 5.5 billion tons, some said it was 5.38 billion tons, some said it was 5.6 billion tons, basically around 5.5 billion tons.
Second, consider the comparability of GDP. If the carbon emission intensity in 2030 is to be measured, the GDP of that year should be comparable to that of 2005. The nominal GDP in 2005 was about 19 trillion, but this was the price at that time, not the comparable GDP in 2020 and 2030. For this reason, it is necessary to convert the GDP deflator into a comparable annual GDP. It is also important to understand the total emissions today (ie 2020) in order to see how much we have achieved in the past 15 years and how much the pace needs to be accelerated in the next 10 years. I saw a relatively easy to remember statement that China's GDP in 2020 will be about 100 trillion, and carbon dioxide emissions will be about 10 billion tons. If 2020 is used as the base year (it is relatively easy to calculate based on this base year), the comparable GDP in 2005 is estimated to be about 30 trillion, and this emission intensity is multiplied by 65% to obtain the carbon emission intensity ceiling in 2030 . In short, to clarify this blueprint in terms of comparable GDP. Third, in the calculation of the 2030 total target (carbon peak), since the emission intensity indicator is still provided externally, the scale of emissions when the carbon peaks in 2030 also depends on the assumption of GDP growth in the next ten years. The speed of GDP growth is different, which will lead to a range in the calculation of total carbon emissions in 2030. Still taking 2020 as the comparable base year, assuming that the average annual GDP growth rate in the next ten years is 5%, and the comparable GDP in 2005 is about 30 trillion, then the total carbon dioxide emissions in 2030 is about 10.1 billion tons, which is 1 more than now. About 100 million tons; if the average annual GDP growth rate is 6%, the total carbon emissions when carbon peaks in 2030 will be 11.1 billion tons, which means that the task of emission reduction in the next 30 years will be even more arduous . There are also some economists who estimate that carbon emissions will be about 10.5-10.6 billion tons when carbon peaks in 2030, so their assumptions about the average annual GDP growth rate are about 5.5%. Therefore, before carbon peaks in 2030, the scale of annual total control of carbon emissions and how to arrange planning tasks and calculate carbon prices are actually not clear and need to be further confirmed.
Fourth, the total accounting also depends on the accounting issues of carbon sinks and wind power and solar power generation. Regarding the scale of carbon absorption by green vegetation such as forests, as mentioned earlier, it was estimated that in 2005, it was about 1 billion tons. Compared with the carbon emissions of that year, the carbon absorption was still relatively small. If large-scale afforestation is planted in my country in the future, even if the carbon absorption scale reaches 1.5-2 billion tons by 2030, it is still relatively small compared to carbon emissions. Our current measurement of carbon sinks is not clear enough. For example, what kind of forest and how much carbon dioxide can be absorbed by the forest, the parameters are not uniform. In addition, by 2060, we may not be able to completely replace fossil energy, and some residual areas (such as power peak regulation, etc.) will continue to use fossil energy. According to the calculation of the Institute of Energy Environment and Economics of Tsinghua University, by 2060, the proportion of fossil energy in the total energy will still be 13%, which is still very large in absolute terms of carbon emissions. The carbon emissions caused by the use of these energy sources must be absorbed through carbon sinks or carbon deposition to achieve carbon neutrality. At the same time, it also needs to rely on the development of new carbon absorption technologies, including the development of carbon capture carbon storage (CCS), etc. to offset . All these require a large amount of basic data and authoritative parameters to measure, in order to know the reduction of total carbon emissions. As for wind and solar power generation, since these types of devices generate fewer hours per year and need to be compatible with energy storage or peak shaving capabilities, it is necessary to convert the installed capacity to the proportion of power supply in the total power generation in order to be effective. Measure the emission reduction process of the power industry.
In short, if you want to do a good job in green finance and carbon market, you need to further clarify the total amount target, and establish a set of parameters, indicator system, measurement and calculation framework for carbon finance and green finance. Various task planning and investment guidance.
Market Economy with Quota and Its General Equilibrium
Some people question and worry whether setting more quotas will shake the basic framework of my country's socialist market economy, especially the large-scale emission quotas, which affect the price determined by market supply and demand, which not only affects the market's decisive role in resource allocation, but also affects the market. Open the door to administratively setting and assigning quotas. It should be said that this doubt is not unreasonable; but such an economic system can be studied using a computable general equilibrium model with quotas. After a long story, the conclusion is roughly: under the constraint of the total amount of quota, if the market supply and demand relationship is used to determine the quota price and realize the market allocation, the general equilibrium with quota will still be achieved, that is, the price system will move, but still It is determined by the market system, and the basic framework of the market economy can still operate. The implication is that if the price and allocation of allowances are not determined by the market, including the unclear total amount constraints, there will be some unknown impacts on the basic framework of the market economy.
In terms of resource allocation, the relationship between the carbon market and the entire resource allocation is essentially a general equilibrium with quotas. Why focus on general equilibrium with quotas? First, if there is a quota, there must be an allocation, and there is a price or some implied price. If the correct policy choice is made, it does not affect the understanding and computability of the general equilibrium model of the overall market. On the other hand, from the perspective of historical practice, our country also has some experience in this area in the past. In the 1980s and 1990s, China's foreign trade largely relied on textile exports. At that time, there was an export quota system in international textile trade, that is, the "Multiple Fibers Agreement" (MFA) under the auspices of the General Agreement on Tariffs and Trade. There are several types of textile quotas mainly set by developed countries, so there is a problem of how China allocates textile export quotas. At that time, the mechanism allowed the auction of quotas through market transactions. This kind of allowance auction is comparable to the carbon allowance trading in the carbon market. Therefore, reviewing some of our past work and research at that time also helps us understand the interaction between the current carbon market and the overall market economy resource allocation.
It should be emphasized that the realization of this new equilibrium with carbon allowances still depends on the power of market supply and demand, and the general equilibrium over time should be considered. As mentioned above, emission reduction mainly relies on investment, and investment can only achieve results across time periods. However, intertemporal investment decisions depend on forecasts of future data and future price data to guide current investments. Therefore, clear aggregate indicators and various parameters in the future are very important.
(The author of this article is the former governor of the People's Bank of China)
Note: This article is the author's comments on Zhu Jun and Ma Jun's keynote speeches at the CF40 biweekly internal seminar "Financial Support for Carbon Peak and Carbon Neutrality: International Experience and China's Path" on January 17, 2021.
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