Carbon Trade Economic Analysis Workshop in Beijing

11 October 2016 – In order to provide policy recommendations and to support key institutions and actors of the national Emissions Trading Scheme (ETS) in China in their efforts to find the most suitable carbon market design for the upcoming national ETS, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and the Environmental Defence Fund (EDF) jointly organised a workshop on October 11th 2016 in Beijing.

This workshop on economic analysis methods in carbon trading mainly focused on the role which models and scientific analysis play for the design and development of an ETS as a decision making tool for policy makers. A carefully selected circle of experts and policy makers were invited to discuss the implications for China, especially in regard to the upcoming establishment of a national emissions trading scheme in 2017. The small scale provided a platform for in-depth discussions between parties and sufficient time for the experts to share their experience with national carbon market policy-making progress.

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German expert Dr. Felix Matthes, Research Coordinator at the Öko-Institut / Institute for Applied Ecology in Germany, shared his extensive expertise on economic modelling of the EU ETS and its impact. Mr. Matthes emphasized that while economic modelling can be of great value when tackling ETS design issues, his experience has shown that using economic modelling to generate (price) forecasts is not the most reliable method. Elaborating on the relation between carbon prices and opportunity costs, Dr. Matthes offered meaningful insight into key challenges the EU faced including the need to better understand the interaction of policies, highlighting that carbon pricing might make up a big part of the policy mix, but needs to be supplemented by other mechanisms for the best possible outcome.

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Mr. Jiang Kejun, Researcher at the Energy Research Institute (ERI) gave a detailed overview and outlook on low carbon and energy transition in China. Mr. Jiang stressed the need for a rapid transition from a carbon intensive highly energy consuming society to a society with low carbon intensity and energy consumption to possibly be able to reach the goal of peaking CO2 emission in China by 2030 as early as 2020 to 2022. Presenting the ERI research on the energy mix and the distribution of fuel sources, he offered an outlook on the expected big changes that will occur in the near future within the energy system in China. According to the research, coal consumption will decline as the demand for natural gas rises. In both cases supply questions must be prepared for and worked on. Simultaneously, progress on renewable energies will accelerate, presenting challenges in regard to distribution and grid capacity.

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A highly relevant and interesting research outcome was presented by Mr. Zhu Lei of the Center for Energy and Environmental Policy Research at the School of Economics and Management of Beihang University. The key research topics included transaction cost and firm coverage in the ETS pilot regions in China with a focus on the influence on the cost effectiveness in the pilots. Provincial strategic allocation and sectoral coverage in the national unified ETS were also addressed, especially in regard to the determination of the sectoral coverage of this scheme and the industrial competitiveness in the context of ETS.

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Mr. Jiang Zhaoli, Deputy Director General of the Climate Change Department within the National Development and Reform Commission (NDRC), attended the meeting and shared his insights and experiences. Declaring the meeting a “feast of information” Mr. Jiang emphasized that while there are already many valuable research outcomes, dialogues and discussions on the findings of scholars need to be enhanced. Further international cooperation in research is necessary and should be promoted continuously. Highlighting the importance of further collection of accurate data on China’s ETS, Mr. Jiang closed the meeting with the statement “only with accurate data, can the market play its designated important role”.