Section 3: Carbon Emissions Trading Market Overview
Carbon emissions trading markets have been developed globally to combat climate change by trading carbon emission allowances as commodities. The European Union, Korea, and China have established significant carbon trading systems.
European Union Carbon Trading Market
The EU Emissions Trading System (EU ETS), established in 2005, is the world's largest and most developed carbon market. It covers about 45% of the EU's greenhouse gas emissions, employing a cap-and-trade system where companies buy or receive emission allowances. The system has seen a reduction in emissions by 23% from 1990 levels by 2019, with the trading volume reaching around 169 billion euros.
Carbon Trading Market in Korea
South Korea's carbon market, launched in 2015, covers significant sectors like steel and aviation, encompassing companies that exceed specific emission thresholds. The Korean Emissions Trading Scheme (KETS) is characterized by its trading of Korean Certified Emission Reductions (KCERs) and Certified Emission Reductions (CERs), providing flexibility in meeting compliance.
Domestic Carbon Trading Market
China’s domestic carbon trading initiated with pilot projects in various provinces and transitioned to a national system in 2021, initially covering the power sector. It features a dual structure of local and national trading markets with no current interconnectivity.
Green Electricity
Green electricity, generated from renewable resources, helps enterprises meet clean energy consumption requirements and enhance corporate responsibility. China's implementation of green electricity standards and trading, including green certificates, aims to integrate it with carbon trading to offer compliance alternatives.
Green Certificate
Green certificates verify electricity from renewable sources. Despite low trading activity, these certificates help companies meet regulatory requirements and improve their environmental image. There is potential for integration with carbon markets, enhancing their value.
Forest Carbon Sink
Forest carbon sinks involve forests absorbing CO2, which can then be certified and traded. China's forest carbon projects are growing, with potential significant market value predicted by 2030. The market for these sinks varies by region and certification standard.
Ocean Carbon Sinks
Ocean carbon sinks involve marine processes that store carbon. These are emerging in the carbon market with projects like marine aquaculture recognized for their carbon absorption capabilities.
Carbon Capture, Utilization, and Storage (CCUS)
CCUS technology captures CO2 emissions from industrial processes for storage or reuse. China's development in this area includes various projects aimed at reducing industrial carbon footprints, with ongoing exploration in integrating CCUS with broader market mechanisms.
Frequently Asked Questions
Questions often arise about the timing for purchasing carbon quotas, the choice of trading markets for businesses, and the functionality of green certificates and electricity in compliance contexts. These elements are crucial for businesses navigating carbon markets, aiming for compliance, and investing in sustainable practices.
