What does it mean that carbon market prices have risen by more than 50 yuan/ton for 3 consecutive days?

According to new data from the Shanghai Environment Exchange, on July 20, the national carbon market carbon emission allowance (CEA) listed agreement transaction volume was 162,000 tons, the transaction volume was 8,631,300 yuan, the opening price was 52.92 yuan/ton, and the high price was 54.00 yuan/ton. The low price was 52.90 yuan/ton, and the closing price was 53.28 yuan/ton. The closing price was 1.87% higher than the previous day.

This is the third consecutive trading day since the national carbon market carbon emission allowances went live. As of July 20, the cumulative transaction volume of carbon trading in the national carbon market was 4.3968 million tons, and the cumulative transaction volume was 226 million yuan.

Four days ago, the national carbon emission trading market started online trading on July 16. The power generation industry has become an industry included in the national carbon market. my country’s carbon market has also become a large-scale global market covering greenhouse gas emissions.

Many people are curious, what kind of market is this? What is the concept of carbon price? What does 50 yuan/ton mean? What impact will it have on life and production?

First of all, the launch of my country’s carbon market is a round of reshuffle for power companies. The price and allocation of carbon emission allowances will directly affect the production and operation costs of enterprises.

According to data released by the China Electricity Council, in 2019, carbon dioxide emissions per unit of thermal power generation in the country were about 838 g/kWh. Based on the average energy consumption level of domestic coal-fired power plants and the new carbon price of 53.28 yuan per ton per ton, the cost of carbon dioxide emissions per kilowatt-hour of coal power is about 0.0446 yuan.

This price is equivalent to about 12% of the desulfurized coal benchmark on-grid electricity price of 0.37 yuan/kWh, which is a big challenge for thermal power companies.

According to the “China Carbon Price Survey 2020” released by the China Carbon Forum, it is expected that at the beginning of the national carbon market in 2021, the average carbon price will rise to 49 yuan/ton (equivalent to 0.041 yuan per kilowatt-hour), which is in line with carbon The average price of 51.23 yuan/ton on the day the market started was relatively close. The survey also predicts that the carbon price will rise to 71 yuan/ton by 2025, 93 yuan/ton by 2030, and more than 167 yuan/ton in the middle of this century (the price per kilowatt-hour is 0.14 yuan).

This means that a number of power companies will face emission problems due to the huge increase in costs, such as the self-provided power plants that were once famous in the industry due to their cost advantages.

As of the end of 2016, the installed capacity of enterprise-owned power plants nationwide had exceeded 142 million kilowatts, accounting for 8.63% of the country’s total installed capacity of 1.646 billion kilowatts that year, of which the self-provided coal power installed capacity was 115 million kilowatts, accounting for 81 of the total installed capacity %. Although these power plants used to have cost advantages, if the price of carbon emissions is included in the future, their costs will be greatly increased and they will face survival problems.

Judging from international experience, with the advancement of the dual carbon goals, carbon emission control will gradually increase, and the supply of carbon emission allowances will also tighten. Changes in the relationship between supply and demand will inevitably bring about a rise in carbon prices.

On May 17, 2021, the European carbon trading price has exceeded the historical high of 56.43 euros/ton (equivalent to RMB 438/ton), which has increased by more than 50% from the beginning of the year, and is 8.6 times the price of China’s carbon allowances. Based on the average energy consumption level of domestic coal power plants and the transaction price of 438 yuan per ton of carbon dioxide, the cost of carbon dioxide emissions per kilowatt-hour of coal power is about 0.367 yuan.

In addition, as the cost of carbon trading increases, its impact will inevitably shift to the upstream and downstream of power companies.

For example, electrolytic aluminum companies, electricity prices account for about 40% of the total cost. The average power consumption for smelting one ton of electrolytic aluminum is 15,000 kWh, and the average cost of electrolytic aluminum is about 14,000 yuan/ton. The sales price of electrolytic aluminum in my country has been hovering for a long time. The break-even line will be affected by the price increase of international bulk commodities in 2021. The market price has rarely risen to 19,000 yuan/ton, but it has hovered around 14,000 yuan most of the time.

According to the domestic carbon trading price of 49 yuan/ton, the cost of one ton of electrolytic aluminum will increase by 615 yuan, which is a large burden for electrolytic aluminum enterprises that have been on the break-even line for a long time.

For the steel industry, the carbon emissions corresponding to each ton of steel produced is about 2 tons, which means that the economic cost of carbon emissions per ton of steel reaches 800 yuan, and the net profit per ton of steel is only 1,000 yuan when the benefits are better. Left and right, the pressure can be imagined.

Moreover, the power industry is just testing the waters. In the future, petrochemical, chemical, building materials, steel, non-ferrous metals, papermaking, and domestic civil aviation industries will also be included in the carbon market industry in addition to changes in electricity costs.

For ordinary consumers, carbon trading is also closely related to us.

Take a petrol car as an example. It consumes 7 liters of fuel per 100 kilometers, emits 2.4 kg of carbon dioxide per liter of gasoline, and emits about 18 kg of carbon dioxide. Referring to the international carbon trading price of 438 yuan/ton, it will increase the additional driving cost of about 7.8 yuan. , Which is equivalent to an increase of about 15% in domestic highway tolls for 100 kilometers. If you refer to the domestic carbon trading price of 49 yuan/ton, the cost will only increase by less than 1 yuan.

For residential electricity consumption, the monthly direct electricity consumption of residents is about 70 kilowatt-hours. Refer to the international carbon trading price of 438 yuan/ton, which is equivalent to 0.367 yuan per kilowatt-hour. It will cost about 25 yuan more per month, more than a year. The expenditure is about 300 yuan. This fee is still acceptable to most residents, and it puts greater pressure on low-income groups in remote areas. However, low-income groups generally consume less electricity, and the increased costs are relatively small. If you refer to the domestic carbon trading price of 49 yuan/ton, the annual cost will increase by about 33 yuan.

Under pressure, companies need to accelerate their transformation while seeking clean energy alternatives.

For example, the five major power generation groups have planned ambitious new energy development plans during the “14th Five-Year Plan” and mid- to long-term, and have vigorously increased the proportion of clean energy installed capacity through the deployment of new energy sources such as wind power and photovoltaics.

As of the end of 2020, the proportions of clean energy installed capacity of State Power Investment Corporation, Huadian Group, Datang Group, Huaneng Group, and National Energy Group were 56.09%, 43.4%, 38.20%, 36.5%, and 26.59%, respectively, compared with the previous year. An increase of 5.59, 3, 5.69, 2.5, and 1.69 percentage points.

Electrolytic aluminum companies such as Weiqiao have entered Yunnan and used the clean energy of Yunnan, a province with large hydropower resources, to reduce the use of fossil energy and reduce their carbon emissions.

The opening of the carbon trading market not only forces the transformation of enterprises, but also provides new business opportunities.

Take Tesla as an example. Tesla’s financial report shows that it will achieve a profit of US$1.4 billion by selling carbon emission credits in 2020, and achieve full-year profit. In the past five years, Tesla has earned $3.3 billion in revenue by selling carbon emission credits. Most of its buyers are traditional automobile manufacturers.

In the long run, carbon trading will derive new industries, and through the redistribution of wealth in traditional industries and clean energy industries, new wealth will be created.

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