What will China's carbon market look like?

The National Development and Reform Commission announced on the 19th that with the power generation industry as a breakthrough, the national carbon emissions trading system was officially launched. Previously, the National Development and Reform Commission issued the "National Carbon Emissions Trading Market Construction Plan (Power Generation Industry)". Climate change is a topic of global concern, and carbon emissions trading is no longer a new word. In the face of the 60%-65% reduction in carbon intensity in 2030 compared with 2005, what kind of carbon trading system should China build? What impact will this have on countries, industries, companies and ordinary people? How will the carbon market be set up? Taking the power generation industry as a breakthrough, more than 1,700 companies were included in the first batch. Compared with other market systems, the carbon emission trading system is a bit special. “The carbon market is essentially a policy market.” Li Gao, director of the Climate Division of the National Development and Reform Commission, said at a press conference on the 19th. This trading system has a strong policy. The government mandates the coverage of the carbon emission trading system, the total amount of emissions, and the emission limits of each enterprise. At the same time, this system must adhere to the market-oriented orientation and be included in the trading system. Enterprises with different carbon emission abatement costs, enterprises with low emission reduction costs over-achieve emission reduction tasks, can sell the remaining carbon emission allowances to enterprises with excess quota emissions to obtain income, and encourage enterprises to improve production through such market-oriented methods. , transformation and upgrading, to achieve the minimum cost reduction. Prior to the nationwide carbon emissions trading system, China's carbon market work began as early as 2011. In 2011, China identified seven provinces and cities such as Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong and Shenzhen as pilot projects for carbon trading. In 2013, Shenzhen took the lead in launching the actual transaction, which opened the curtain of China's carbon market, and the pilot provinces and cities gradually started to operate. At present, it has included nearly 3,000 key emission units. As of November 2017, the accumulated quota volume reached 200 million tons of carbon dioxide equivalent, about 4.6 billion yuan. The pilot situation is good. Is it suitable for promotion to the whole country? The "Plan" clearly stipulates that in accordance with the principle of "adhering to the first, then difficult, step by step", the power generation industry (including cogeneration) will take the lead in launching the national carbon emission trading system, and then gradually expand the industry scope of participating in the carbon market and increase transactions. Variety. Taking power generation industry as a breakthrough in carbon market construction, Jiang Zhaoli, deputy director of the Climate Department of the National Development and Reform Commission, said that there are four reasons: First, the power generation industry has a good data foundation, a single product, complete emission data measurement facilities, data management specifications and easy to verify, quota allocation The first batch is included in the enterprise. Yujia, the emissions will exceed 3 billion tons, with strong demonstration significance; Third, the management system is relatively sound, the industry is dominated by large enterprises, easy to manage; Fourth, from the international experience, the thermal power industry is the priority of carbon markets in various countries Incorporated into the industry. To build a nationwide carbon market, the preparatory work to be done is very complicated. After defining the scope of the industry, the most important thing is to set up the institutional framework. The "Program" clearly states that China's carbon market will consist of three main systems and four supporting systems. The three main systems are carbon emission monitoring, reporting and verification systems, quota management systems for key emission units, and market transaction related systems; four supporting systems are carbon emission data reporting systems, carbon emission rights registration systems, and carbon emissions trading. System and carbon emissions trading settlement system. The "Proposal" also gives a timetable for steadily advancing the construction of the carbon market. It is divided into three steps: the infrastructure construction period - the completion of the national unified data reporting system, registration system and trading system construction in a year or so. Carry out the construction of the carbon market management system; simulate the operation period - use a year or so to carry out the quota simulation transaction of the power generation industry, comprehensively test the effectiveness and reliability of each factor of the market, strengthen the market risk warning and prevention mechanism; deepen the improvement period —— Carry out quota spot trading among the trading entities in the power generation industry. Under the premise of stable operation of the carbon market in the power generation industry, gradually expand the market coverage and enrich the trading varieties and trading methods. “Building a national carbon emission trading market is a key task for the country to cope with climate change and low-carbon development in the current and future period.” Li Gao said that China should establish a “market-oriented, government-oriented service, adhere to the first easy Difficult, step-by-step, adhere to the coordination and synergy, extensive participation, adhere to the unified standards, fair and open" carbon emissions trading market. Will the carbon market have an impact? Institutional opportunities for green transformation of enterprises and industries, everyone will be the direct beneficiary. Huaxin Cement was the first batch of enterprises to be included in the carbon emission management in Hubei Province in 2014. In the first year of implementation, it cost more than 30 million yuan to purchase carbon allowances. . “We received a quota of 20.46 million tons in the same year, but we found that the actual emission allowance exceeded 1,153,400 tons during the annual compliance period. The cost of purchasing the quota is equivalent to the net income of our company in Central China for one year, and the losses are heavy.” Li Ying, Minister of Climate Protection of Huaxin Cement, introduced. This cost is a profound lesson. Huaxin Cement has made great efforts in energy conservation and emission reduction since the second year. It has set up a climate protection department to process domestic waste and factory waste into a green environment through independent research and development technology. Garbage-derived fuels replace traditional coal. In one year, Huaxin Cement not only no longer needs to purchase emission allowances, but also realized a net income of more than 9 million yuan through the sale of surplus of 423,800 tons of carbon credits. There are still many such enterprises. In the past three years, the province's province's control enterprises that have been included in the carbon market have achieved carbon market revenues of 300 million yuan through energy conservation and carbon reduction. The national carbon market was launched and the companies that were included were the most directly affected. For enterprises, is this an increase in the burden, or is it an institutional opportunity to save energy and reduce emissions and enhance competitiveness? “More means opportunities, and encourages enterprises to increase energy conservation and emission reduction on the one hand, reduce emission intensity through technological innovation, and increase clean energy development on the other.” The relevant person in charge of Huaneng Group said that for four years, the company has gone from zero. At the beginning, we explored the establishment of a carbon asset management information system, set up a carbon trading team, optimized trading strategies, gradually improved the efficiency of compliance transactions, and reduced the cost of compliance. The four-year compliance rate reached 100%. According to Jiang Zhaoli, according to the current system of carbon emission quotas, which are “freely allocated and linked to the actual output of enterprises”, it is only those enterprises with low energy efficiency levels that really need to purchase more quotas. “According to the current trial results, 80% of the enterprises receive a basic balance between their quotas and their emissions. A slight deficiency can be self-digested by strengthening energy conservation management, and 10% of enterprises with advanced industry levels will generate quota surpluses. At the same time, Jiang Zhaoli emphasized that the cost pressure of some enterprises will not spread to the whole industry and downstream industries, because a single enterprise may generate a quota surplus or gap, which will achieve a basic internal balance in the industry as a whole. Not only for specific enterprises, but also for the industry as a whole, carbon market construction is also a great opportunity for green transformation. Jiang Zhaoli believes that the carbon market will have a restraining effect on enterprises with low energy efficiency, and will actively promote the expansion of production capacity of enterprises with high energy efficiency. Wang Zhixuan, a member of the China Electricity Council's party group and full-time vice chairman, also said that the carbon market can push the power optimization structure through carbon constraints, making renewable energy power generation technology more economically competitive and accelerating the replacement of renewable energy power generation. At the same time, through the continuous improvement and expansion of the carbon market, the proportion of coal to coal is increased, and centralized utilization and centralized management are promoted. “Companies and industries must actively participate in carbon trading and win opportunities under carbon constraints.” Wang Zhixuan said. From the perspective of ordinary people, the carbon market construction will help the "blue sky defense war", and everyone will become a direct beneficiary. “The main source of carbon emissions is emissions from fossil fuel combustion, which is homologous to the main pollutants emitted by the atmosphere. Under the influence of the carbon market mechanism, enterprises are fine-tuning by optimizing energy structure, adopting energy-saving low-carbon and new energy technologies. Measures such as management will improve energy efficiency and reduce carbon emissions, and will also effectively reduce pollutant emissions from the source." Jiang Zhaoli introduced. It is estimated that for every ton of CO2 emissions reduced, approximately 3.2 kg of sulphur dioxide and 2.8 kg of NOx emissions will be reduced accordingly. Carbon trading has also opened up new ideas for precision poverty alleviation. At present, a large number of voluntary agricultural and forestry emission reduction projects in poverty-stricken areas have been developed in China and benefited from carbon market transactions. From 2015 to 2017, China's voluntary certification of agricultural and forestry in poverty-stricken areas in Hubei Province has accumulated a total of 0.71 million tons, an increase of 10.16 million yuan for farmers. Where is the construction of the carbon market difficult? The trading system is complex in design, the market needs to be active and orderly, and it is expected that more Chinese wisdom will start carbon trading from the pilot provinces and cities in 2011 to two years after the start of the pilot cities in 2013, from the national carbon market on December 19, 2017. It takes about two years to start the construction of the power industry and start the spot trading. It is a long-term and arduous task to gradually expand the carbon trading market to cover the industry and scope, and to enrich the trading varieties and trading methods. Is it so difficult to build a carbon trading market? “Construction of the carbon market is a major institutional innovation, and it is also a complex system engineering. There is no ready-made experience to follow.” Jiang Zhaoli said that in the pilot process of various provinces and cities, both problems were found and solutions were also sought. It is difficult to design complexity on the top layer. In order to establish a national carbon market, in addition to considering coverage, it is necessary to accurately design the total carbon emissions and quota allocation methods of the trading system in the target years in the future. For example, total setting is a very challenging job. Zhang Xiliang, a professor at Tsinghua University, said that the total setting should not only consider the characteristics of the carbon market coverage, but also the national carbon emission reduction targets and the expectations of the carbon emissions trading system in different years, and the economic growth rate for the next period. And the trading system covers the growth of the industry to make certain predictions. On the other hand, the affordability and competitiveness of industry and enterprises should also be taken into consideration. From the international experience of carbon market construction and the pilot practice of seven provinces and cities in China, the total setting faces many uncertainties, and should follow the principle of “moderately tight” and “gradual and orderly” to ensure that the national carbon market plays a role. . It is difficult to stimulate market activity. Beijing is one of the seven pilot provinces and cities with the largest number of transactions and the most abundant types of transactions. There are nearly 1,000 compliance entities. However, the relevant person in charge of the Beijing Environment Exchange said that although the scale and activity of the transaction are continuously rising, the scale of the pilot market has been limited, and it is unable to form a sufficient transaction scale, which is not conducive to the full formation of the market-based carbon pricing mechanism, and the carbon trading only It can implement T+5 spot trading methods, and lacks financial trading products and risk management tools such as carbon futures. In addition, companies participate in transactions mainly for performance, which leads to low transaction activity, which in turn affects the size of the transaction. It is difficult to play a regulatory role. Whether the carbon emission data reported by enterprises is accurate, whether the quota allocation is fair and equitable, how to punish non-compliance enterprises, how to establish a market risk warning and prevention mechanism, these regulatory issues require the coordinated management of the central and local departments and agencies. The "Program" has already clarified the principles of national unified market and localized management. The development and reform department of the State Council, in conjunction with relevant industry authorities, has formulated quota allocation plans, verified technical specifications and supervised implementation; provincial-level response to climate change authorities supervised data verification within their respective jurisdictions. The allocation of quotas, the implementation of key emission units, the supervision of key emission units shall be paid, and the key emission units that have been overdue or insufficiently paid shall be punished according to the law. The National Development and Reform Commission will also promote the construction of a social credit system in the field of carbon emissions, and impose penalties on key emission units that have been overdue or insufficiently paid in accordance with the law, and incorporate relevant information into the national credit information sharing platform to implement joint punishment. "The complexity of the carbon market, the wide-ranging impact and the high degree of relevance to various policies require us to lay a solid foundation, coordinate relations, and steadily advance." Wang Zhixuan said. With the development of the national carbon market, China is expected to become the world's largest carbon market. In the future, there will be more difficult challenges waiting for China's experience and Chinese wisdom to overcome. Part of the carbon emission trading pilot situation Beijing carbon emission trading market Beijing carbon emission trading market opened in November 2013, currently including 945 key emission units. Among the previous seven pilot provinces and cities, Beijing has the largest number of transactions and the most abundant types. In order to increase the control of greenhouse gas emission reduction, in 2016, Beijing adjusted the coverage of controlled enterprises to expand direct and indirect emissions from direct and indirect emissions of 10,000 tons or more from the administrative region. The key emission units of 5,000 tons or more have jumped from 543 to 945. Beijing's carbon market has a diverse range of participants and a large market openness, making it the first pilot province to achieve cross-regional transactions. Shanghai carbon emission trading market Shanghai carbon emission trading market was officially launched in November 2013, achieving 100% compliance for four consecutive years. At present, 310 key emitters in 27 industrial and non-industrial industries, including steel, electric power, chemical, building materials, textile, aviation, water transport, and commercial hotels, have been included in the pilot. Up to now, the total turnover of Shanghai's carbon trading market has reached 87.41 million tons, with an accumulated turnover of over 900 million yuan. More than 600 companies and institutions have participated. The Shanghai carbon trading pilot has the characteristics of “clear system, market regulation, orderly management, and effective emission reduction”. The actual carbon emissions of pilot enterprises decreased by about 7% compared to the start of 2013. Hubei Carbon Emissions Trading Center Hubei Carbon Emissions Trading Center opened in April 2014 and has been included in 236 enterprises. According to statistics, after more than three years of piloting, the investment in energy conservation and emission reduction has increased by 38% year-on-year, and the total amount of emissions has decreased by 26.91 million tons. 60% of enterprises achieved absolute emission reduction, 19% of enterprises achieved intensity reduction, and the proportion of controlled emissions enterprises in the province's carbon emissions decreased from 47% to 43%. The main body of the enterprise included in the transaction is an industrial enterprise with an annual comprehensive energy consumption of 60,000 tons of standard coal and above in the administrative region of Hubei Province. Although the pilot has a high threshold and a small number of enterprises, it covers a large proportion of carbon emissions, and pays attention to the flexible and controllable quota allocation. The initial quota allocation is generally tight, and the system of “one year one allocation, one year one liquidation” is adopted. Take the method of recovering and canceling the untraded quota.

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