China Beijing Environmental Exchange (CBEEX) is a corporate, domestic, and international environmental equity public emissions trading scheme initiated by the China Beijing Equity Exchange (CBEX) and authorized by the Beijing municipal government.
Background
Climate crisis Many of the environmental policies proposed by China are in response to their significant greenhouse gas emissions, especially from carbon dioxide (CO2), their main greenhouse gas emission. In 1980, China emitted less than 1.5 gigatonnes (Gt) of CO2 per capita from fossil fuels. Over the next 20 years, in conjunction with the economic reforms under Deng Xiaoping's rule, CO2 emissions rose by about 4% each year to around 3 Gt per capita. From 2000 to 2012, the emissions rate more than doubled, and China started emitting over 9 Gt per capita each year. While the rate slowed down over the next few years due to changes in the economy and some climate reforms, emissions once again shot up to keep up with the demand for air conditioning. The main source of emissions is from coal. Between 1980 and 2010, China's yearly use of oil, cement, and natural gas combined did not exceed 2 Gt, while coal was responsible for over 2 Gt of emissions in 2000 and peaked at almost 7.5 Gt in the early 2010s. Mass production using coal dates back to the Seventh Five-Year Plan (1986–1990) where China's division of labor was based on what each region specialized in. As a result, the provinces in the coastal central areas, which are more industrialized, are the main driving forces of China's economy. Historically, coal-intensive industries are the most successful, and coal consumption is often related to China's economic growth. Along with the economic growth rhetoric, other provinces, especially the less developed, started to adopt an industrial work ethic and along with it, more coal consumption. Because some of these underdeveloped provinces like Shaanxi and Sichuan do not specialize in industrial work, their economic production compared to central China is severely lacking. Therefore, there is an inefficient use of land resources, and with it, wasteful coal consumption.
Origin CO2 emissions via coal consumption became a big focus in China's Eleventh Five-Year Plan (2006–2010) which was a commitment to reduce emissions with respect to GDP by 20%. One solution proposed was to establish the first Chinese emissions exchange in Tianjin in September 2008. With the help of foreign exchanges such as the Chicago Climate Exchange (CCX) and the European Climate Exchange (ECX), China emerged as a major competitor in the Asian emissions market. Shortly before this, China introduced the China Beijing Environmental Exchange (CBEEX) as a market for environmental equities. It would also adapt the goals set up by the Tianjin Climate Exchange (TCX) and fulfill the environmental goals of the Eleventh Five-Year Plan.
History
Panda Standard Along with BlueNext, China Forestry Exchange (CFEX), Winrock International, and Asian Development Bank (ADB), the CBEEX launched the first standard to combat greenhouse gas emissions, namely CO2 emissions, at the Copenhagen Summit in late 2009. The goal was to develop new methods that support China environmentally, economically, legally, socially, and efficiently while giving full transparency and credibility within the carbon market. They would achieve this by promoting the agriculture, forestry, and other land use (AFOLU) sector under the Clean Development Mechanism (CDM) to help the impoverished work under their projects and potentially scale back to more efficient methods for a cleaner environment.
Projects There are four main project types in which companies can earn credits through the Panda Standard. Below are some examples of each type:
Forest Management
Rotation extensions: Companies can allow trees to age longer, enabling them to absorb more carbon. Harvest rates: Companies can simply cut fewer trees. Moreover, efficient use of the resulting lumber by leaving no dead wood on the ground can further give credit. New techniques: Sometimes, the simplest solution is to work efficiently or try new things. Companies can combine species of trees to further increase the life of a tree which, in turn, gives more carbon stock. Companies can also forego logging practices and use other materials. Deforestation measures: Preventing deforestation is a way to earn credits. For unplanned deforestation, companies plan to use that land for vegetation or other carbon-friendly ideas.
Forestation and Vegetation Increase
Planting trees via seeds: Depending on the area and with respect to the habitat and efficient rundowns, credit can be earned if done correctly and without damaging the ecosystem. Fallow length altering: One can increase period lengths of fallows or simply plant more of them in barren areas. High-biomass planting: By establishing vegetation with the purpose of increasing the live biomass around it, one can prolong the life in the area which ties into increased vegetation and crops.
Cropland Management
Soil carbon stock increase: Changing, decreasing, or even ending tillage practices, dedicating more land to be used for crops, or even adding exogenous carbon (such as manure, compost, or biochar) are all ways to use soil efficiently without emitting more carbon. Planting vegetables: Planting legumes benefits from a low-carbon cost of production and provides an alternative to meat eating. Along with a campaign to dramatically reduce meat consumption and promote a healthy lifestyle so that the mass production of vegetables does not go to waste, this project has the potential to be a solution to China's CO2 crisis. Human management: Reduction of using machines that need fossil fuels is a simple way to get credit.
Grassland Management
Degradation: Reduce cutting biomass and prolong its life, with the goal of reducing emissions by giving areas chances to regrow or heal instead of immediately converting the land to something else. Livestock management: Alter the grazing patterns of livestock to let grasslands regrow. Species composition: Similar to forest and cropland management, altering the species composition in different areas can increase the long-term soil carbon and lead to efficient carbon reductions.
Notable transactions The first transaction made under the Panda Standard was the result of cooperation between China and France. Technical support was provided by the Ministry of Science and Technology (MOST) while funding was provided by the French Development Agency (ADF) and the French Facility for Global Environment (FFEM). Franshion Properties, affiliated with Sinochem, purchased voluntary emission reductions (VERs) from Yunnan Mengxiang Bamboo Industry Co. Ltd. Over 50,000 hectares of bamboo were planted, using 16,800 tonnes worth of VERs. This transaction aided in the development of the forest industry, decreased local poverty, and was the real estate industry's first carbon neutral project.
Emission Trading System (Beijing) In China's Twelfth Five-Year Plan (2011–2015), the country aimed to further advance environmental policies, specifically focusing on reducing carbon emissions relative to GDP by 17%. This was a departure from the previous plan, which primarily targeted reducing overall energy inefficiency. The plan also sought to curb the GDP growth rate, adding an additional challenge to emission reduction efforts. Building on the success of the Eleventh Five-Year Plan, it proved challenging to encourage smaller companies, many of which already operated with energy efficiency in mind, to align with these new goals. To accomplish this objective, China revisited its traditional core industries and identified new, environmentally friendly alternatives that could produce similar goods. For instance, transitioning from coal to nuclear and solar energy sources exemplifies this shift towards greener practices. During the development of the Twelfth Five-Year Plan, China introduced the concept of a carbon trading market, which eventually led to the establishment of China's Emission Trading System (ETS). Initially, the ETS comprised seven pilot programs, although an official carbon trading scheme was not implemented until late 2017. Similar to carbon markets worldwide, companies participating in the ETS rely on emission permits to regulate their emissions. These permits are essential for maintaining low emissions levels; without them, companies face significant market restrictions and must actively work to reduce their emissions to comply with set thresholds. Once companies obtain permits, they have the flexibility to trade them internally or with other firms to acquire carbon credits. The establishment of the ETS aimed to regulate carbon emissions by incentivizing their reduction and maintenance at low levels, all while transitioning towards more sustainable and environmentally-friendly practices without causing significant harm to GDP growth. This approach not only contributes to improving air quality in many cities but also specifically benefits places like Beijing, which was one of the pilot locations for the ETS and launched its program in late 2013.
The Beijing ETS operates under the "1+1+N" policy framework. The first "1" establishes the service regulations, assigns roles to all stakeholders based on their expertise and rights, and ensures government oversight of operations. These principles are outlined in the "Decision on Implementing CO2 ETS in Beijing" document. The second "1" serves as the legal foundation of the ETS, as detailed in the "Interim Measures for the Management of Emissions Trading in Beijing" document. This component specifies the responsibilities of each department, clarifies operational procedures, and oversees all activities within the carbon market. Lastly, the "N" component offers additional guidance and reminders that complement and reinforce the principles set forth by the first and second "1" elements.
The CBEEX plays a crucial role in upholding the integrity of the values outlined in the Beijing ETS. Its primary objective is to ensure stability and liquidity within the trading environment in the capital city. Additionally, the CBEEX monitors all transactions to guarantee fairness and public support for each purchase. As the overseer of the trading platform, companies are required to comply with the regulations it sets to ensure that all transactions conducted within the platform are legitimate and verified.
There are two primary trading schemes permitted within the Beijing ETS: Beijing Emissions Allowance (BEA) and project-based offsets. The BEA focuses on the allocation of allowances and is denoted in tCO2 (tonnes of CO2) units. Conversely, project-based offsets oversee Chinese Certified Emission Reductions (CCER), energy conservation projects, carbon sink projects, and Motor Vehicles Voluntary Emission Reduction. In this scheme, the units are measured in tCO2e (tonnes of carbon dioxide equivalent). Trades under these schemes can be conducted online or in-person under the supervision of the CBEEX and its regulations. In online trading, there are three types of orders available. Firstly, all-or-none orders are executed entirely or not at all. Secondly, sweep-to-fill orders group orders based on specific characteristics, with selections made based on the asking price. Lastly, limit orders establish a predetermined price threshold for a product, allowing multiple companies to purchase the same item at the set price or higher.
Carbon Emissions Trading Scheme