Environmental Engineering Reference
In-Depth Information
2. The role and position of the government is crucial to carbon market development.
Carbon dioxide is a special type of commodity in that its tradability depends
on the regulation of the government, and its price is also under the influence of
government scientists and other elements. Therefore, the government's role and
position is one of the essential elements that affect the development of carbon
market. A reliable certification system, registration system, unified standards and
a professional trading platform must be established to support the market;
in addition, there should be relevant risk-control policies to keep the carbon
price relatively stable and reflect the real supply and demand of the market.
3. Emission reduction target, overall emissions and the allocation must be scientific
and reasonable.
The market demand of carbon emissions allowances comes from emission
reduction target setup of the overall system and the scarcity of allocated
allowances of mandatory compliance enterprises. The setup of overall emissions
and allocation shall take into account national, regional, industrial and enterprise
development needs and also the realization of overall emission reduction target
with an eye to constructing healthy and positive market supply and demand
structure. EU ETS encountered a downturn in the late second stage, especially
the external economic situation. As a result, industries and enterprises had
decreased demand for emission allowances and those in market circulation
exceed actual demand. One of the problems is excessive allowance allocation
to some extent.
4. Futures trading help stabilize the price of carbon.
There were violent fluctuations during the early period of operations for the
EU-ETS because it did not take specific financial accounts to form a stable
pricing mechanism and a risk prevention mechanism. Afterward, the European
Climate Exchange issued futures linked with EU allowances, thereby increasing
the liquidity of the market and stabilizing the carbon price.
5. A well-functioning legal system is the foundation and safeguard for building a
carbon market.
As the premise and safeguard for carbon market construction and operation,
government shall establish the legal basis for enterprises to accomplish carbon
emission target as well as provide relevant restrictions and sanctions for
unaccomplished target. In the United States, for example, California made
laws in 2006 addressing GHG emissions. The government also established a
strict punishment mechanism. For another example, the EU punishment system
against enterprises with excess carbon emissions ensures the normal operation of
carbon emissions trading market.
7.5.2 Recommendations for China's Carbon Market Construction
To sum up, China's carbon market is achieving rapid development under the
regulation of the central government. However, it is still difficult to achieve the
goal of constructing a carbon market during China's 12th Five-Year Plan period
