The Research Of China's Carbon Emissions Trading Market

Carbon emission right refers to the right to discharge greenhouse gas;and carbon emission trading is a measure using market mechanism to address the issue of greenhouse gas emission.Though carbon emission trading market has only been established for less than ten years,it has exhibited vigorous vitality and experienced rapid development.Development countries,including USA,EU and some developing countries have established carbon emission trading markets in succession.As the largest supplier country for Clean Development Mechanism(CDM)project,our country has not built a complete and impeccable carbon emission trading market,and thereby being at an unfavorable position in global carbon emission trading market.In September 2009,President Hu Jintao announced at the United Nation General Assembly that by the year of 2020,CO2 emission intensity per unit of GDP will be reduced by 40%to 45%relative to the level of 2005,and the consumption of non-fossil energy will be increased to 15%of the consumption of non-renewable energy.This promise has not only demonstrated our country's courage and resolution in undertaking the global responsibility of carbon emission reduction,but also provided confidence and basis for the establishment of domestic carbon emission trading market.Therefore,the issue of carbon emission trading market's future development needs to be urgently addressed.With the aim to develop domestic carbon emissions trading market,this paper first studied current situation and experience of international carbon emissions trading market.In present,carbon emissions trading markets have developed rather rapidly in developed countries,and the market systems are relatively mature which is mainly reflected by the following facts:first,the product types are relatively rich and rationally structured.The major products include EU allowance(EUA)and certified emission reduction(CER).EUA is carbon emission rights which are produced by EU emissions trading system,a quota market.According to emission reduction target,EU sets regional emission volume and distributes quotas to emission reduction subjects.Enterprises with excess emission will be fined,making quota a kind of scarce resources available for trading.The EU allocation of quota is referred to as EU allowance(EUA).CER refers to carbon emission rights produced by the clean development mechanism(CDM)project.By project rendering,developed countries provide developing countries with capital and technology to help reduce emission and decrease carbon dioxide emissions of the projects.After being verified by relevant departments in United Nations,reduced carbon dioxide emissions become certified emission reductions(CER).At the beginning,EU EUS stipulates EUA as trading products;later CER enter the market.While in the recent years,EU ETS has brought aircraft industry into reduction scope and has presented airline quota product-EUAA.Moreover,EU ETS keep producing various kinds of carbon emission rights derivatives.Through marketing,voluntary emission reduction projects have offered diversified emissions standards and enriched market products.Voluntary quota market has gradually turned into mandatory quota market.Chicago voluntary quota market Chicago climate exchange(CCX),a voluntary quota market in Chicago,has stopped the trading of carbon emissions rights product CFI,and the scale of voluntary emission reduction project market is far less than that of the quota market.Therefore,the market has been gradually transforming into quota market.Second,the trader structure keeps improving.There are different types of institutional investors participating in market transactions in EU ETS;and the investing force is also increasing in CDM project market which is represented by India.Third,the innovation speed of derivative markets is rather fast and the price discovery function is significant.Derivatives market trading products have developed from futures,forwards to options,swaps;and they are developing at a high speed and the derivatives are being presented quickly.Studies of EUA and CER products have found that the price of carbon emission right spot goods exhibits high volatility and traders have a strong demand on carbon emission right derivatives.The empirical studies on EUA and CER futures show that the price discovery function of EUA futures has appeared.Therefore,futures products can provide price reference for spot products,and traders can use future markets to conduct risk management.Fourth,government regulation efficiency is high,and quota distribution is gradual and of the right amount,and the allocation is also more and more reasonable.Compared to the global market,China's carbon emissions trading market has many deficiencies in the development.Firstly,imperfect trading system,including the lack of a market product-the Chinese Certified Emission Reduction(CCER)from the clean development mechanism(CDM)projects market,the Shenzhen Allowance(SZA)made by mandatory quotas market and the voluntary emission reduction(VER).Traders in the market are single.The market lacks the participation of institutional investors.Market development is not balanced.The market relies on the CDM project market too much.The voluntary market develops slowly,while the quota market is just starting.Second,the derivatives market has not yet started,the carbon emissions futures and options products are missing;Third,government regulation is in low efficiency.Combined with the problems occurred in China's carbon emissions trading market as well as the experience of international carbon market,we draw the conclusion that our country should improve the development of the spot market,the derivatives market,and strengthen government regulation to develop our carbon emissions trading market.A vast of voluntary standard and carbon derivatives products can create a marketwhich is full of products.Introduce various types of institutional investors,speculators into the spot market can make the traders in the market richer.Make the quota-free market to be the focal point of the spot market.Develop a national exchange.The above four points is the key todeveloping the spot market.In order to enhance the bargaining power in the CDM project market,to provide tools to manage the risk in the market,we should develop the futures market vigorously.We have accumulated the experience to improve the futures market in a commodity market.Characteristics of carbon emission determined that it is easy to launch future products in carbon emission market.The global market also has to experience for reference.Based on the points discussed above,paper draw the conclusion that China should actively promote the futures market.This paper designed SZA futures contracts and gives some suggestions about the trade structure and trading platform.The government regulation,a sound legal system should be established.The government should improve regulatory efficiency,locate the proper amount of the quota allocation and pay attention to the shift in the allocation.