The Ministry of Environment (MOE) plans to implement a draft carbon trading system for domestic carbon credits in the first half of the year. At a public hearing on the 8th, industry insiders expressed concern that the MOE's 5% handling fee per transaction was excessive. The Climate Agency stated that carbon trading fees are not conventional fees, reflecting the industry's responsibility to reduce carbon emissions and cannot be compared to financial products. To prevent speculation, the draft will not allow for the resale of carbon credits, and each credit will be traded only once.
Carbon trading fees of 5% are considered too high by some businesses; the Climate Agency says they are not standard fees.
The Ministry of Environment (MOE) released a draft of the "Regulations on the Auction and Transfer of Greenhouse Gas Reduction Credits" (referred to as the "Carbon Trading Regulations") in December of last year (2023). A public hearing and discussion session was held on the 8th, inviting representatives from government agencies, civil society groups, and industry to discuss the matter. Huang Weiming, Deputy Director of the Climate Change Agency, stated that the regulations will be implemented in the first half of this year.
The draft stipulates that domestic carbon credits can be traded in three ways: fixed-price transactions, negotiated transactions, and auctions. Regardless of the transaction method, the Ministry of Environment will charge the buyer a 5% handling fee. A representative from China Petrochemical Corporation pointed out that typical securities trading fees are typically under 1%, making carbon trading fees excessively high. The Iron and Steel Association, however, argued that "negotiated transactions" do not utilize the carbon trading platform, making the 5% handling fee unreasonable.
Huang Weiming, Deputy Director of the Climate Agency, stated that carbon trading fees are not general regulatory fees or platform service fees and should not be understood as financial products. Huang Weiming added in an interview that businesses purchasing carbon credits to offset emissions do not actually fulfill their emission reduction obligations. Overseas countries typically use fees to impose additional responsibilities on businesses and contribute to national carbon reduction funds. For example, in Singapore, whose carbon trading system is similar to ours, the carbon trading fee is 5%.
However, the draft also stipulates that carbon credits under 100 metric tons are exempt from fees, which could lead to circumventing fees by splitting transactions into multiple transactions. The Financial Supervisory Commission has also suggested that the Ministry of Environment consider adjusting the threshold. Huang Weiming responded that carbon trading often exceeds 100 tons, and if circumvention were to occur, the costs could be substantial, and he will further explore how to resolve the issue.
Does the remnant of "trash carbon credits" affect carbon pricing? Environmental groups call for upper and lower limits.
How many times can a carbon credit be traded? To prevent speculation, the draft stipulates that each carbon credit can only be traded once. However, the Semiconductor Industry Association believes that the number of transactions should be moderately open, for example, allowing companies to resell 10% of the carbon credits they acquire. Huang Weiming stated that if carbon credits could be resold, there would be a risk of reluctance to sell and speculation, and that the market would eventually be filled with "old carbon" that is not worthy of carbon reduction benefits. "You want to sell, but no one is willing to buy," which would be detrimental to the industry.
The Environmental Protection Administration previously allowed some industries to obtain carbon reduction credits through "preliminary projects," but the issuance mechanism at the time was lax, leading environmental groups to criticize them as "junk carbon credits." In response to the Ministry of Environment's decision to allow these credits to be traded through negotiated transactions, Taiwan Climate Action Network researcher Lin Yuxuan called for further price limits to be established to prevent low-quality credits from being purchased in large quantities by businesses at low prices and used to offset carbon fees, thus affecting carbon pricing. The Semiconductor Industry Association called for the preliminaries to be treated equally with the other two types of carbon reduction credits (offset projects and voluntary reduction projects), all of which are issued through legal applications. Restricting them to negotiated transactions is unreasonable.
Huang Weiming stated that the initial project was designed as an incentive and was less rigorous than subsequent carbon reduction measures. Strict restrictions were imposed on carbon usage, carbon trading, and carbon fee offsets to avoid misleading the public into believing they were equivalent to other types of carbon reduction credits. He emphasized that the initial project's carbon fee offsets "would not be a ton-for-ton exchange," but would instead offer "a significant discount," but he did not address whether upper and lower limits would be set.
As for companies with their own carbon neutrality needs, can they acquire domestic carbon credits? Huang Weiming stated that the Climate Law stipulates that companies must have needs for incremental carbon credits, carbon fee deductions, or other "purposes approved by the Ministry of Environment" to participate in trading. However, the latter purpose has not yet been specified in the draft carbon trading regulations, and the relevant mechanism will be re-evaluated.
Source: Environmental Information Centre
