Global net zero emissions will cost hundreds of billions of dollars

On Saturday, at the “3rd Bund Finance Summit” held by CF40, China’s special envoy for climate change affairs Xie Zhenhua said that China is formulating a carbon peak and carbon neutral “1+N” policy system and will successively release top-level design documents. , Carbon peaking action plan by 2030 and policy measures in key industries and key areas.

With the realization of the “dual carbon” goal, a large amount of funding needs have emerged. According to calculations by relevant United Nations agencies, to achieve the global temperature rise control target set by the Paris Agreement, the world is expected to require nearly 100 trillion U.S. dollars. According to calculations by Standard Chartered, China will need a total of RMB 127 trillion to RMB 192 trillion to achieve the goal of “carbon neutrality”, which is equivalent to an annual investment of RMB 3.2 trillion to RMB 4.8 trillion.

Chen Wenhui, vice chairman of the National Council of Social Security Fund, said that with the advancement of the “dual carbon” goal, China’s economic structure may undergo very large changes. For investors, this means that the “dual carbon” field will be a long, wide, and thick investment track that can focus on many key areas such as the renewable energy industry chain and green infrastructure.

China’s top-level design documents will be released soon

Xie Zhenhua revealed that China has established a leading group for carbon peaking and carbon neutrality, and is formulating a carbon peaking and carbon neutral “1+N” policy system, and will successively release top-level design documents and a carbon peaking action plan by 2030. And policy measures in key industries and key areas.

Zhu Jun, Director of the International Department of the People’s Bank of China, said in his interpretation of the report “Financial Support for Carbon Peaking, Carbon Neutrality-International Experience and Chinese Practice”, that green classification standards, information disclosure, and stress testing are important infrastructures for green finance. The development of green finance must further consolidate the foundation.

Zhu Jun revealed that the People’s Bank of China will promote “domestic unification and international convergence” of green classification standards. At present, there are three sets of green classification standards in China by the Development and Reform Commission, the People’s Bank of China, and the China Banking and Insurance Regulatory Commission. There are differences in the scope of application, the scope of the project, and the degree of refinement. In the future, the standards need to be unified as much as possible.

“The People’s Bank of China will further strengthen the disclosure of climate information.” Zhu Jun suggested that China should promote more domestic enterprises and financial institutions to implement mandatory disclosure of climate-related information, and continue to actively support the International Financial Reporting Standards (IFRS) to formulate sustainable Actions related to global standards for information reporting.

In addition, Zhu Jun also stated that the People’s Bank of China is currently organizing a stress test for climate risk, and the People’s Bank of China will continue to explore and improve this important work in the next step.

In fact, China’s exploration of green finance is playing a leading role in the world.

Zhu Jun introduced that the People’s Bank of China once again served as the co-chair of the G20 Sustainable Finance Working Group this year, and drafted the “G20 Sustainable Finance Roadmap” with G20 colleagues, which has recently been approved by the G20 Ministerial Meeting. This roadmap is the G20’s first framework document on sustainable finance, coordinating the five key areas of green classification standards, strengthening climate information disclosure, and improving climate risk management. It clarifies the direction and measures of work and will guide market funds at the global level. Provide important guidance to support green development.

The carbon market will play an important role

Xie Zhenhua pointed out that countries around the world need to actively establish national, regional and global carbon markets and carbon pricing mechanisms to reduce emission reduction costs, increase emission reduction efforts, and promote technological innovation and sustainable development. Through the carbon market revenue sharing mechanism, it provides a stable source of funds for developing countries to adapt to climate change and carry out capacity building. At the same time, it is necessary to ensure the environmental integrity of the global carbon market, prevent double counting of emission reductions, avoid carbon leakage, and promote fair trade.

Zhu Jun said that finance can play an important role in the development of the carbon market. The first is to improve the pricing efficiency of the carbon market. With the help of financial tools, carbon pricing can be expanded from a single spot price to a price curve composed of multiple maturities, facilitating intertemporal decision-making by market entities. Secondly, risk management can be facilitated. Financial instruments provide channels for hedging risks, which facilitates market entities to better manage the risk exposure of carbon assets.

“Finance can also facilitate the interconnection between markets.” Zhu Jun pointed out that the current carbon prices in various countries are different, and there is no unified carbon market and no unified path around the world. One feasible way is to explore the interconnection of the carbon market through the interconnection of the financial markets of various countries, so as to promote the global joint emission reduction.

In addition, Bill Winters, Chief Executive Officer of Standard Chartered Group, said that Standard Chartered’s survey found that a standardized global measurement and disclosure framework can enable companies to provide clear, comparable and consistent data and help them accelerate their low-carbon transformation. To assist carbon-intensive companies in their transformation, an effective and strong carbon market is a key factor. The carbon market can help direct funds to projects or activities that reduce or eliminate carbon emissions and remove carbon from the environment.

“Dual carbon” investment track is wide and long

According to previous estimates by the International Energy Agency, the global economy will spend more than US$100 trillion in the next 30 years of the transition to net zero emissions. David Schwimmer, CEO of the London Stock Exchange Group, said that the world is working hard to allow capital to flow into decarbonized and diversified growth industries, and finance is also supporting green industries, including but not limited to renewable energy, batteries and LED technology, and thermal insulation. , Seawater desalination, flood control, etc.

Faced with such a large funding gap, Xie Zhenhua said that developed countries must fulfill their annual funding commitment of 100 billion U.S. dollars and give full play to the guidance and leverage of public funds. On this basis, actively develop green finance, promote the establishment of a system design, policy system, and information disclosure system that encourages green sustainable investment, and guide social investment to low-carbon fields.

At the same time, guiding social funds into low-carbon industries also brings huge investment opportunities to investors around the world.

Chen Wenhui believes that “dual carbon” may change the economic structure, such as the subversion of production methods and changes in the economic structure. In this process, the “dual carbon” will form a long, wide, and thick investment track.

In his view, “long” refers to a longer event cycle; “wide” means that under the “dual carbon” goal, a large number of related industries and their derived industries will continue to emerge; while “thick” refers to At each stage of this process, various contradictions need to be solved continuously, and there will be repeated iterations in technology and industry. At present, many central enterprises are deploying renewable energy industry chain and green infrastructure, such as photovoltaic, wind energy, large infrastructure, UHV, transmission and distribution, energy storage industry chain and other facilities, which can become the current “dual carbon” investment Areas of focus.

Chen Wenhui believes that carbon trading and carbon assets will become areas of focus for investment institutions in the future. The carbon exchange is still at a relatively early stage. The subjects and investment institutions involved in the transaction have not participated in the transaction. There are no futures products at this stage, but it is still worth looking forward to.

In addition, Chen Wenhui also said that although this is a long, wide and thick track, we must also pay attention to preventing economic bubbles that may be brought about by “crashing”. Some traditional assets may need to be gradually withdrawn in the long run. However, if the withdrawal is too fast, it will have a greater impact on the economy and society. This requires investors to grasp investment risks.