Recap Curriculum a visit to Shanghai Environment and Energy Exchange | Duke Kunshan University

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Recap Curriculum a visit to Shanghai Environment and Energy Exchange

01-28-2021

To get theoretical knowledge and practical experience on carbon emission trading, iMEP students, together with Coraline Goron, an assistant professor of environmental policy, visited Shanghai Environment and Energy Exchange on September 25th. Students who are overseas visited virtually and joined in the discussion with the help of synchronous translation by their Chinese classmates. Focusing on the construction of the national carbon market and carbon emission trading, officers from Shanghai Environment and Energy Exchange shared professional theoretical knowledge and advanced practical experience with our students and faculty.

Shanghai Environment and Energy Exchange is the first environment and energy trading platform approved by the Shanghai Municipal People's Government, which has become one of the largest environment exchanges in China.

Mr. Dongyang Yu, the project manager from the Strategy, Research, and Innovation Center, took the students to the trading hall. Then, the general manager Mr. Xiaoming Lai introduced the history of China's participation in the carbon market and the basic situations of the carbon emission trading market.

Before 2010, China focused more on economic development, thus striving for more carbon emissions. After the United Nations Climate Change Conference in 2010, China began to gradually implement a carbon emission reduction mechanism. In October 2011, the National Development and Reform Commission approved the pilot projects of carbon emission trading in Beijing, Shanghai, Tianjin, Chongqing, Hubei, Guangdong, and Shenzhen. In 2017, China officially launched the construction of the national carbon market, and China's pilot carbon market has now grown into the second-largest carbon market in the world in terms of quota trading volume.

Manufacturing, transportation, and construction are the three industries with the highest carbon emissions, and carbon exchanges mainly promote carbon emission reduction in those industries. Most of the transaction subjects are enterprises and investment institutions, instead of individual investors. There are two types of basic products in the carbon market: one is the quota initially allocated to enterprises by policymakers; the other is the emission reduction certificate obtained through the implementation of reducing greenhouse gas emissions, namely CCER. In the process of implementation, if an enterprise’s carbon emissions exceed the carbon quota, it will need to purchase the quotas from other enterprises, which forms a carbon trade. Enterprises can also adopt new energy solutions and other ways to reduce emissions voluntarily, which can be certified by the state.

On this basis, Mr. Yu gave a detailed introduction on the general situation, the progress of carbon emission reduction, and the follow-up plans of Shanghai Environment and Energy Exchange. In Shanghai, the carbon market has formed a complete set of mechanisms and management modes and has established an open, transparent, stable, and effective market. With the combination of carbon emission control and market orientation, the Shanghai Environment and Energy Exchange is also actively cultivating and promoting the development of carbon-related industries. The Carbon Inclusive Project, which is characterized by a focus on the coexistence of public welfare and commerciality, strives for public participation: the carbon credits obtained by residents through carbon emission reduction can be converted into concessions in consumptions.

However, at the same time, there are still some problems and deficiencies in China's carbon emission governance. For example, one problem is insufficient market liquidity. Due to the low degree of marketization, sometimes the trading volume is relatively low while the trades are often frequent in performance periods. Although a significant increase of trading volume in the performance period is inevitable, in order to solve the liquidity problem, enterprises must have a stable expectation of the carbon price. To some extent, the carbon price depends on policy changes, so there are certain policy risks. Besides, often with market trading, enterprises tend to store excess carbon emission quotas in their accounts for future use.

The interactions between Shanghai Environment and Energy Exchange officers and students were remarkable. Mr. Yu gave professional answers one by one to students with questions.

Students' Thoughts after the Visit

Ziyue Wang
Class of 2022, Master of Environmental Policy

During our visit to the Shanghai Environment and Energy Exchange, Mr. Dongyang Yu, from the Strategy, Research, and Innovation Center, introduced the mechanisms, the innovative forms of carbon finance, and the prospects for the establishment of the national carbon market in the future. President Xi said that China would achieve carbon neutralization by 2060 in the general debate of the UN General Assembly, which is undoubtedly a booster for the development of China's carbon trading market. From this field trip, I learned about the difficulties China's carbon market has experienced since its inception, which also inspired my determination as an environmental science student to make my own contribution in the future. In 2060, I will probably have retired, and China’s goal of carbon neutralization is also the goal of my career.

Xiaofan Qian
Class of 2022, Master of Environmental Policy

The trip to the Shanghai Environment and Energy Exchange on Friday was fruitful. In the course titled Key Points on Global Environmental Policy, we had learned about climate policy and carbon trading policy in China and abroad, and had gotten basic understandings of the important climate conferences, such as the United Nations Convention on Climate Change, Kyoto Protocol, Copenhagen Protocol, Paris Protocol, etc. With this kind of thinking on climate and carbon trading policies, we set foot in the Shanghai Environment and Energy Exchange. At the exchange, we studied the carbon quota, domestic carbon quota formulation, and CCER operation mechanism based on the Paris Agreement. After the introduction from Mr. Yu, we also had a clear understanding of the trading framework and the curve of the pilot carbon trading market since its establishment in 2013. At the same time, we also studied the different policies in different regions. I hope that when the national carbon trading system is officially launched next year, it will help the domestic carbon market towards the goal of energy conservation and emission reduction.

Min Ruan
Class of 2022, Master of Environmental Policy

Carbon pricing has always been my focus. This visit answered many questions that I couldn't find answers to in literature and helped me gain a deeper understanding of the current and future policies of China's carbon trading system. I sincerely hope the carbon trading mechanism and relevant policies can help us achieve carbon neutrality by 2060!

 

Photography:Xiaohan Cui, Sichong Sun
Edit: Yunan Bi
Translation: Huaping Wang
Proofreading: Remington Gillis