The "carbon trading" opportunity or challenge for steel?

Against the background of climate change and the development of a low-carbon economy, the Chinese government clearly stated that during the 12th Five-Year Plan period, carbon emission rights trading pilots will be established to gradually establish a carbon emission trading market and approve Beijing, Tianjin and Shanghai. Seven provinces and cities in Chongqing and other provinces and cities have carried out carbon emissions trading pilot projects, and seven provinces and cities have promised to start this work by the end of 2013. In fact, prior to the “carbon trading” pilot, many provinces and cities have set up their own carbon emission rights exchanges or energy and environmental exchanges, but these exchanges are mostly in an embarrassing situation where there is no market, and there are few There are high energy-consuming companies involved. According to the announced plan, the power, steel, non-ferrous metals, building materials, petrochemical, and chemical industries have become the first batch of industries that have been forcibly included in the pilot. Then, what impact will "carbon trading" have on the steel industry? How to solve the problems that come with it?

Raw material industry pressure on carbon emission reduction

As the world’s second largest energy consumer, China’s total carbon emissions are high. On the one hand, it is determined by China’s energy structure. On the other hand, the deepening of China’s industrialization and urbanization has accelerated the development of the heavy chemical industry, with high energy consumption and high energy consumption. The continuous growth of the emissions industry has led to an increase in carbon emissions.

Industry is the main area of ​​carbon emissions in China. Although in recent years, the elimination of backward production capacity and energy conservation and emission reduction have been effective in the raw material industries such as steel, the status quo of China's transition to the late stage of industrialization has determined that the total carbon emissions will continue to rise. According to statistics from the China Iron and Steel Association, as of the end of 2012, the actual integrated domestic steel production capacity was about 976 million tons. According to statistics, the output of crude steel was 731 million tons, and the capacity utilization rate was 74.9%. The increase in the absolute value of steel production capacity increased the pressure for emission reduction.

On July 30, according to data released by the National Development and Reform Commission, during the “Twelfth Five-Year Plan” period, China’s energy-saving and emission-reducing key project investment will reach 2.3 trillion yuan, and renewable energy development investment will reach 1.8 trillion yuan, with high-efficiency energy-saving technologies and equipment. The market share will increase from the current 5% to 30%. The differential electricity price policy will be implemented in eight high-energy-consuming industries such as steel, and industries with overcapacity will face higher electricity prices. From 2015, China will gradually expand the pilot scope of carbon emissions trading and explore the establishment of China's carbon trading market. By 2020, China’s CO2 emissions per unit of GDP will fall by 40% to 45% from the levels in 2005, and the proportion of non-fossil fuel consumption in energy consumption will increase to 15%.

Impact on steel geometry

Avoid the risk of damage from trade frictions. After the international financial crisis, international trade protectionism has risen. In order to protect the domestic market, the United States, the European Union and other developed countries and regions as well as Brazil, India and other developing countries have increasingly imposed trade restrictions on China. At present, carbon tariffs aimed at energy conservation, emission reduction and environmental protection are becoming more and more popular among countries as a new means of trade protection, and developed countries have used this to achieve the purpose of curbing the rise of emerging countries. The "U.S. Clean Energy Security Act" clearly states that since January 1, 2020, countries that have not implemented carbon emission reduction policies will have to enter the United States market after purchasing carbon emission allowances and carbon emission permits from the United States. The implementation of "carbon trading" can avoid other countries from refinancing carbon tariffs on China's export products, thereby eliminating the double taxation problem and also avoiding the risk of Chinese enterprises' damage in international trade frictions.

Increase the company's production and operating pressure. Whether in the international market is protected by carbon tariffs traded by other countries or by the enforcement of “carbon trading” in the country, corporate costs will increase, often including explicit costs and hidden costs. Explicit costs are mainly caused by the improvement of production processes, the renewing of production equipment or the purchase of environmentally friendly production raw materials with higher purchase prices. Implicit costs mainly refer to the opportunity costs incurred by companies participating in “carbon trading”, such as giving up the production part. Companies that have higher carbon emissions but can bring higher profits to the company. The implementation of the “carbon trading” will cause quite a number of small and medium-sized raw material companies with high energy consumption and low efficiency to be eliminated by the market. Even large enterprises with strong capabilities will increase R&D costs due to the development of new energy-saving and emission-reduction technologies. Therefore, in the short term, companies will face pressure from production and operation.

The export competitiveness has declined. Steel is a labor-intensive and energy-intensive industry with a relatively high carbon emission density. The cost pressure caused by the implementation of "carbon trading" will be passed on to the product price, which will weaken the price advantage of China's steel products in the international market, leading to a decline in the competitiveness and market share of the product, and an impact on the company's international competitiveness.

Promote structural adjustment and transformation and upgrading. The implementation of "carbon trading" will cause certain adverse effects on China's iron and steel enterprises in the short term, but in the long run, it can speed up the formation of backward mechanisms to eliminate backward production capacity, and provide opportunities for the transformation and upgrade of China's raw material industry. The “12th Five-Year Plan” period is a crucial period for the transformation of China’s economic structure. The task of transforming and upgrading the steel industry and eliminating backward production capacity is even more urgent. Although the implementation of "carbon trading" will increase business costs, but it can also force companies to actively carry out technological innovation, vigorously develop energy-saving and environmentally friendly production technologies, improve the level of energy consumption and production efficiency, eliminate high energy consumption and low efficiency companies, and promote the optimization of industrial structure .

China's "carbon trading" lacks relevant guarantees

Greenhouse gas emissions are not limited to the political field and responsibility obligations, but also contain a huge market. Competition among countries in the world has become fierce and gradually evolved into a dispute between the right to development and the right to dominate. Developed countries are adopting voluntary agreements, energy/carbon dioxide taxes, emissions trading, renewable energy or cogeneration production quotas, energy efficiency standards, and direct financial incentives for renewable energy to reduce emissions of greenhouse gases. Among them, the method of levying carbon tariffs is relatively common. It can reduce the import of carbon-intensive products from developed countries, and in particular, reduce the import of manufactured products from major developing countries such as China, India, and Brazil. This not only maintains the advantages of advanced carbon emission reduction technologies. The economic interests of the country also help the developed countries to seize the commanding heights of a new round of global competition.

At present, the global "carbon trading" market share is about 150 billion US dollars. In such a huge market, since China does not have its own national "carbon trading" market, the market and standards for "carbon trading" are foreign, and there is no pricing power or discourse power in the international "carbon trading" market. Therefore, although China's carbon emissions trading volume has accounted for about 1/3 of the global market, this huge "cake" has been eaten by the United States and Europe.

"Carbon trading" is also a kind of financial activity, using economic means to achieve energy conservation and emission reduction and create economic benefits. Foreign experience shows that to make this economic means work, it must have a certain scale and liquidity, and it must have financial market support. However, in terms of finance, China’s experience is still insufficient. At present, some domestic financial institutions have begun to target carbon finance concept development related products in order to have a place in the huge "carbon trading" market in the future.

How to ensure energy conservation and emission reduction under the premise of fair competition is the most concern for the steel companies. For China, as a new industry, "carbon trading" is urgently needed to improve the legal system to regulate the behavior of participating parties and industry standards. The lack of national laws and regulations is also an obstacle to the further development of China's "carbon trading" market. In the future, China's “carbon trading” market will inevitably encounter more systemic problems after expanding from the regional trading platform system to the entire country.

According to the experience of the European Union, the establishment of the “carbon trading” system is based on basic emissions data statistics, technical and regulatory support, and transaction management methods and management platform design. The construction of China's “carbon trading” market is the first national goal, planning and management approach, but it lacks the most important basic data support. The formation of a scientific and effective nationwide "carbon trading" market clearly has more work to do.

Suggestions

The first is to provide necessary support policies to support companies' voluntary emission reductions. With the government as the leading force and enterprises as the mainstay, supporting key enterprises have become pilot enterprises for carbon emissions trading. We must fully consider the affordability of enterprises and formulate reasonable management measures and incentive measures for carbon emission reduction. While protecting the ecological environment, we must also encourage companies to implement voluntary emission reduction actions, and minimize the negative impact of the implementation of carbon trading on enterprises and even economic development. Differentiate the differences existing in different industries, regions, and stages of development, and gradually complete the pilot work of carbon emissions trading. For enterprises that have difficulties, they must implement such policies as tax rebate exemption, tax rebate subsidies, and fiscal discount, to protect the competitiveness of Chinese enterprises in the international market.

The second is to optimize the production structure and promote industrial upgrading. Optimize the industrial structure, accelerate the elimination of backward production capacity, and establish and form a mechanism for the mandatory elimination of backward production processes, technologies, equipment and products. Optimize the industrial layout, extend the industrial chain, and develop a circular economy park. Increase investment in corporate mergers and reorganizations, increase industrial concentration, and exert economies of scale. Transformation depends on the traditional way of development that the product scale wins, optimizes the allocation of elements such as technology, manpower, and capital, and strives to strengthen products with high value-added products, enhance quality with science and technology, and create green products.

The third is to improve the level of energy-saving technologies in enterprises and achieve cleaner production. Strengthen the awareness of energy conservation in enterprises, encourage the promotion and application of energy-saving technologies and equipment, increase the level of energy efficiency utilization, encourage enterprises to extend the industrial chain, and reduce the energy consumption of unit industries with added value. Strengthen technological transformation of enterprises, improve production management level, timely check the total amount of carbon emissions and controllable quantities in the process of production and operation, clarify the cost pressures that can be afforded by the company under the existing technical conditions, and improve the technology, and start the technology according to actual conditions. upgrade. For example, the organization and implementation of energy-saving industrial furnace kiln reform, energy-saving internal combustion engine system, energy-saving transformation of the motor system, waste heat and pressure recovery and utilization, etc., in order to achieve energy-saving purposes, to achieve cleaner production.

The fourth is to accelerate the research and development of low-carbon technologies and products. Pay attention to technological innovation and promote the application of advanced low-carbon technologies in the steel industry. Effectively digesting and absorbing advanced low-carbon technologies from abroad, through the promotion and application of new low-carbon economic and technological methods, will lead our country toward a new low-carbon economy. Promote emission control and disposal technologies for greenhouse gases, including biological and engineering carbon sequestration technologies, clean, efficient development and utilization technologies for coal, oil and natural gas, and capture and storage of carbon dioxide. Adopt comprehensive control measures to encourage enterprises to produce low-carbon products, stimulate market demand for low-carbon products, increase preferential support policies, and promote low-carbon products to gain market recognition.

The fifth is to strengthen international exchanges and cooperation in carbon trading. Strengthen international cooperation in the field of "carbon trading", actively expand international cooperation channels, establish international cooperation platforms, establish mechanisms for capital, technology transfer, and talent introduction, explore and establish a "carbon trading" market suitable for China, and achieve low cost and high efficiency. The goal of greenhouse gas emissions. Promote domestic enterprises to take the road of low-carbon development, encourage large-scale enterprises to go global, learn advanced foreign experience, and strengthen the exchange of innovations in related fields such as technology research and development, production control, management and management with foreign advanced emission reduction technologies, and improve the company’s The level of energy-saving and emission-reduction technologies will enhance the right of Chinese enterprises to speak in the international market.