A department director of the Shanghai Environment Energy Exchange (SEEE) said that blockchain will play an important role in the Chinese carbon cap-and-trade system for confirming, trading, and circulating carbon emission data. The statement comes at a time when China is intensively issuing top-down documents on reducing carbon emission heading into the 26th United Nations Climate Change Conference.
Fast facts
- Chang Zheng, head of business strategy and R&D at SEEE, said at the Wanxiang Blockchain Summit last week that blockchain technology can be essential for use in the carbon trading market. The authenticity of carbon emission data is the foundation of carbon trading and blockchain can help ensure the reliability of the carbon emission and trading data.
- Chang said China currently relies on manual verification of carbon emissions data, including critical data on power generation and fuel purchases. Since the application of blockchain in carbon trading is still rare, it is hard to guarantee the accuracy, completeness, and transparency of carbon emission data, she continued. Chang said the Internet of Things and blockchain will be technologies to monitor and store critical data from power plants to determine carbon emissions in the future.
- Applying carbon cap-and-trade is one of the measures taken by China to reach peak carbon dioxide emissions by 2030 and thereby attain carbon neutrality by 2060, as proposed by President Xi Jinping. China’s first nationwide carbon emissions trading market was launched by SEEE in July this year, and the first batch of carbon trading companies were mainly power generation companies with total carbon emissions of 4.5 billion tons.
- The carbon cap-and-trade system is a method of mitigating total carbon emissions. In the system, a total target of carbon emissions is set, and emission credits are allocated among companies. Those enterprises whose carbon emissions exceed their quotas must purchase additional emission permits from companies with excess credits. In theory, such a system can strictly limit carbon emissions and encourage companies to explore production methods with lower carbon emissions.
- Previously, two Chinese cities, Huzhou and Tianjin, announced the use of blockchain to track emissions data for carbon trading.
- On Thursday, the State Council of China issued a white paper, “China’s Policies and Actions to Address Climate Change,” which pointed out the carbon emissions trading system has entered the legislative process.
- Last week, the Central Committee of the Communist Party of China and the State Council issued a top-level document, “Opinions on reaching peak carbon emissions and carbon neutralization.” It gives 11 orders to realize the goal of reducing carbon emissions by 18% from 2020 levels in the next five years. Speeding up the national carbon emission trading market’s expansion and improvement is also listed as one of the orders.
- The ongoing 26th United Nations Climate Change Conference in Glasgow is meeting to advance goals set by the Paris Agreement and the UN Framework Convention on Climate Change.
- Carbon trading is already a widely adopted system globally for reducing carbon emissions. Carbon markets are now under way in over 50 jurisdictions worldwide, but the results of its implementation have been mixed. The EU launched the world’s first carbon trading market, but it has been criticized for setting too low a price for emissions to provide an incentive for companies to reduce them. In addition, analysts deem the system “incapable of achieving the 43% reduction target by 2030,” and critics condemn the prevalence of speculative trading and fraud in the market.