Core Insights - The national carbon market in China is a government-led trading system aimed at reducing carbon emissions, officially launched on July 16, 2021, covering 2,225 enterprises in the power sector with an annual emission coverage of approximately 4.5 billion tons, making it the largest carbon trading market globally [1][2] Group 1: Key Terminology - Carbon Emission Allowance (CEA) allows companies to emit a specific amount of CO₂, where 1 allowance equals 1 ton of CO₂ equivalent (tCO₂e). Companies must hold enough allowances to cover their emissions by the end of the compliance period to avoid penalties [3][4] - Carbon Allowance refers to the emissions permits allocated to companies by the government, with a future trend of decreasing free allowances and increasing paid allowances to incentivize emission reductions [5] - Carbon Trading involves the buying and selling of carbon allowances or reduction credits, primarily through agreements, with potential future inclusion of financial instruments like futures and options [6] Group 2: Market Mechanisms - CCER (China Certified Emission Reduction) represents carbon credits generated from projects like renewable energy and forestry, which can offset up to 5% of a company's emissions [7] - The MRV (Monitoring, Reporting, Verification) system ensures the accuracy of carbon emission data, serving as the foundation for fair market operations [8] - Carbon Price is the market price for carbon allowances, currently ranging from 50 to 80 RMB per ton, significantly lower than the EU price of approximately 80 Euros per ton, with expectations of gradual increases as policies tighten [9][10] Group 3: Goals and Strategies - Peak Carbon refers to the point at which CO₂ emissions reach their highest level before beginning to decline, with China committing to achieve this by 2030 [11][12] - Carbon Neutrality aims for net-zero emissions by 2060 through emission reductions, carbon sinks, and technological innovations [15] - Carbon Sink involves natural processes, such as forests absorbing CO₂, which can be developed into carbon credit projects [16] Group 4: Financial and Regulatory Aspects - Carbon Finance encompasses financial innovations related to the carbon market, enhancing market liquidity and reducing compliance costs for companies [17] - Carbon Footprint measures the total carbon emissions produced directly or indirectly by individuals, companies, or products throughout their lifecycle [18] - Carbon Border Tax is a proposed tariff on high-carbon imports to balance domestic and international carbon costs, with potential implications for high-carbon exporting companies [19] Group 5: Monitoring and Verification - Carbon Monitoring utilizes technologies like sensors and satellites to track carbon emissions and greenhouse gas concentrations, with pilot projects already underway in 16 cities [20][21] - Carbon Accounting systematically quantifies carbon emissions for companies or products over a specific period, adhering to international standards [22] - Carbon Verification involves third-party audits of carbon emission reports to ensure data accuracy, a requirement for major emitters in the national carbon market [27]

Investment Rating - The report emphasizes the importance of developing carbon finance in the banking and insurance sectors to support green, low-carbon, and circular economies, aligning with national dual carbon goals [2][7]. Core Insights - The report outlines a comprehensive plan for enhancing green finance, focusing on carbon market construction and innovative financial services related to carbon accounts [2][8]. - It highlights the necessity of integrating climate investment and financing into the financial system, addressing both mitigation and adaptation strategies for climate change [14][15]. Summary by Sections Section 1: Supporting Carbon Market Construction - The report discusses multiple measures to support the construction of carbon markets, which are essential for achieving dual carbon goals. It emphasizes the need for financial institutions to actively support carbon trading markets and develop relevant financial services [8][9]. - The implementation of a carbon account system is identified as a foundational task for developing carbon finance, which will facilitate the trading of carbon emissions rights and enhance climate investment [9][10]. Section 2: Innovating Financial Services Around Carbon Accounts - Carbon accounts are becoming a key reference for financial pricing, with banks encouraged to utilize carbon account data to innovate financial products such as "carbon loans" and sustainable development-linked loans [10][11]. - The report highlights successful case studies, such as the collaboration between Minsheng Bank and State Grid Yingda Group, which developed a credit product to support low-carbon transitions for SMEs based on carbon emissions monitoring [11][12]. Section 3: Climate Investment and Financing - The report defines climate investment and financing as crucial for achieving national low-carbon development goals, focusing on both mitigation and adaptation strategies [14][15]. - It outlines specific areas for climate investment, including the development of non-fossil energy, carbon capture technologies, and enhancing agricultural resilience to climate change [16][17].

Core Viewpoint - Hubei province is leveraging its ecological advantages to develop a carbon finance ecosystem, with the establishment of the national carbon market registration and settlement platform ("Zhong Carbon Registration") in Wuhan serving as a catalyst for innovation in carbon financial products and services [1][2]. Group 1: Carbon Finance Development - The People's Bank of China Hubei Branch has been actively promoting financial product and service innovation based on green assets, leading to the emergence of pioneering products such as carbon emission rights pledge loans and carbon asset custody [2]. - The current development of carbon finance in China faces several bottlenecks, including the unclear legal status of carbon emission rights, which complicates their pledge and collateralization [2][3]. Group 2: Legal and Regulatory Recommendations - To protect the rights of financial institutions in carbon emission rights pledge loans, it is recommended to establish national-level management measures and operational guidelines for carbon quota registration, pledging, and disposal [3]. - The suggestion includes utilizing the Zhong Carbon Registration's freezing function for pledged carbon emission rights to mitigate risks such as double pledging [3]. Group 3: Market Participation and Infrastructure - Financial institutions are currently unable to directly participate in the national carbon market, which limits the development of carbon finance and may lead to asset losses in case of loan defaults [4]. - It is proposed that financial institutions be allowed to participate in the national carbon emission rights trading market to enhance market liquidity and ensure the legality of their trading qualifications [4]. Group 4: Future Directions for Carbon Finance - Support is recommended for the Zhong Carbon Registration to leverage its core infrastructure advantages to establish a carbon clearinghouse in Wuhan, attracting various carbon finance entities and fostering innovation in carbon finance [5]. - The creation of a "Zhong Carbon Index" is suggested to stabilize carbon price expectations and provide clear pricing signals for carbon asset rights, trading, and pricing [5].