Can the waste power generation industry participate in the carbon trading market?

Not long ago, the Ministry of Ecology and Environment issued 《Interim Regulations on the Management of Carbon Emission Trading (revised draft)》 and publicly solicited opinions. At the end of June this year, the national carbon emission trading market is about to start. The first batch to be included in the national carbon emission trading market is the electric power industry.

On the one hand, the biomass power generation industry is looking forward to getting dividends through the carbon trading market. To alleviate the impact of the withdrawal of state subsidies, on the other hand, some enterprises in the industry are worried about their unsold emissions reduction and the high cost of accounting for emission reduction.

What is the reality? Can the biomass power generation industry get a share of the carbon trading market? Are China's current carbon emission trading standards suitable for emission reduction accounting in China's biomass emission generation industry?

After the national compensation retreat slope, the industry is facing a reshuffle

Last year, the policy of the gradual withdrawal of state subsidies in the biomass power generation industry has been made clear. Supplementary notice of《Several Opinions on promoting the healthy development of non-water renewable energy generation》released, Biomass power generation projects(including agricultural and forestry biomass power generation, junk power generation and methane power generation projects) will no longer enjoy state subsidies if they had been operated at least 15 years or reasonable utilization hours throughout the whole life cycle achieved 82,500 hours.

Agriculture and forestry biomass power generation industry has suffered the biggest impact. The industry has previously enjoyed preferential subsidies. Subsidy prices are also higher than  industries such as waste incineration. The sum of the benchmark electricity price plus the subsidy electricity price is 0.75 yuan/ kWh. But actually, Agricultural and forestry biomass power generation enterprises' raw material cost is relatively high. According to the calculation of Biomass Industry Branch of China Industrial Development Promotion Association. The average price of the raw material is about 300 yuan / ton. For per kWh enterprise produces , the required fuel cost is 0.42 yuan. Therefore, after the state electricity price subsidy gradually retreated, according the benchmark electricity price of national average of approximately 0.38yuan / kWh, Purchase price of raw materials may be higher than the sale price. Businesses will face losses.

Industry insiders said, in the established policy context, Industry business model is impacted. Most companies and projects will stop operating. The industry will face a mass elimination.

"It will be a sub-industry reshuffle."  Heilongjiang Construction Investment Group Energy CEO Wang Guomao believes. A number of enterprises that rely on subsidies will be eliminated, which is a good thing for the healthy development of the industry. But in a short time, pressure on businesses remains. Therefore, He hopes that the carbon emission trading rights will bring benefits to the industry.

Be not blindly optimistic or pessimistic about the carbon market

"The establishment and development of the carbon market is the general trend. It is an important means of promoting greenhouse gas emissions reduction ,coping with climate change and promoting green, low-carbon and sustainable development and building ecological civilization. Waste incineration for power generation、agriculture and forestry biomass power generation.、coal-fired synthetic sludge and other carbon reduced or Zero-carbon industry will get benefits from it theoretically." China Environmental Protection Federation Waste Power Generation Special Committee Secretary-General Guo Yungao said. The establishment of the carbon market is even seen as a key reason for alternative biomass electricity price subsidies.

However. Can biomass power generation enterprises really profit?

There are still two very different views in the industry, one is to see a new development space through the window of the carbon market, looking forward to get priority trading rights in carbon trading as if in state subsidy time.

Another view worries about the occurrence of awkward situation as " the door is well closed while the window is difficult to open " The national subsidy was cancelled but we could not open the door to the carbon trading market.

The worry is actually justified. According to the China Marine Society Certification Company Beijing branch business director Li Xia introduced, since the opening of the Chinese voluntary qualified CCER market in 2012,Local project application is very active . As at the time of cessation of certification in 2017, there are 861 CCER projects registered through the competent national authorities. 254 of them had been certified. "These are all yet to be consumed by the carbon market.

Quotas transaction represents 95% of the future carbon trading market. Voluntary emissions reduction trading CCER represents only 5%. Projects capable of generating CCER mainly include wind power、photovoltaic power、hydropower、biomass power generation, etc. It may give priority to wind power, photovoltaic trading. Space left for biomass power generation companies is limited.

In addition, Wang Yong, a waste power generation expert at the China Environmental Protection Federation, said the carbon emissions reductions for carbon trading of a waste incineration power plant is not big . The gains from the carbon trading cannot be compared with the state subsidy. Also accounting for carbon emissions may add to new costs. But in the general trend of carbon emissions trading, the waste incineration power generation industry is bound to be involved. The increase in accounting costs is his concern.

Guo Yungao believes that first, the certainty of carbon reduction in the biomass power generation industry is not clear; secondly, the industry belongs to a voluntary emission reduction project (CCER),and voluntary emission reduction projects have no rigid constraints for cashing. Moreover, according to the pilot’s experience, price is significantly lower than the carbon quota price; finally, the carbon quality of biomass power generation is unmatched with the wind power and photovoltaic industry. There is also no international commitment as "China's installed wind power and photovoltaic capacity will exceed 1.2 billion kilowatts in 2030" to guarantee.

"Therefore,the industry can not be too optimistic or pessimistic about entering the carbon emission trading market. What can be done right now is to actively strive for it. "He said. On the one hand, we should strive for the priority position of biomass power generation in the CCER project. On the other hand, we should strive to get priority for biomass power generation such as waste incineration power generation to be included into the key greenhouse gas reduction projects of the Carbon Emission Government Fund.

Are the current carbon emission certification standards suitable for garbage incineration and other industries?

"Launch the Chinese certification technical specifications of greenhouse gas emission reduction for waste incineration power generation, coal-fired coupled sludge and biomass power generation as soon as possible." This is the appealing made by Guo Yungao on behalf of the industry.

In 2012, the National Development and Reform Commission issued the 《Interim Measures for the Management of Greenhouse Gas Voluntary Emission Reduction Transactions》 and 《the Guide for the Approval and Verification of Greenhouse Gas Reduction Projects》. Thereafter, the National Development and Reform Commission released 177 national greenhouse gas voluntary emission reduction projects (CCER methodology) in three batches.

According to the above two documents, the CCER project in China currently largely adopts the International Clean Development Mechanism (CDM) project method to calculate the emission reduction of the project. Taking the waste incineration power generation project as an example. Under the framework of CDM, the climate department of the former National Development and Reform Commission released two CCER methods on January 23,2014.

"There are some problems in the practical operation, and the methodology in 2014 is unable to meet the current situation of waste disposal in China.” Li Xia said.

She said that in the 2014 methodology, the "proportion of fossil carbon to total carbon in garbage", "total carbon content of garbage", as well as methane and nitrogen oxide emission factors of garbage (wet base), the guide’s default data of IPCC national greenhouse gas emission list is used all the time in the project application and emission reduction issuance.

"In recent years, China's waste incineration power generation industry has developed rapidly. Especially after the 'assemble set connect 'of waste incineration power plants, the industry technology level and pollution control level have reached the world's advanced level. For example, previously it required that 'the auxiliary fossil fuel of the incinerator should not exceed 50% of the total energy generated by the incinerator'. Now the furnace can achieve 850 degrees Celsius without burning fossil fuel. Fossil fuel is only used for start and stop of the incinerator." Wang Yong believes that the data of 2006 can no longer be used as an industry judgment criterion. At the same time, according to the current situation of the industry, to calculate carbon emissions according to the energy industry is not conducive to highlighting the people's livelihood and environmental protection attributes of garbage incineration power generation. Therefore, it is necessary to optimize the carbon emission calculation method.

Li Xia suggested that the authorities determine various carbon content parameters according to conditions of urban and rural garbage in China. We should amend the project benchmark line and the project emission scenario according to local conditions, which is applicable to the actual situation of waste incineration power generation in China.

Zhang Meng, the executive deputy director of environmental big data center of Tsinghua Strait Research Institute also said that our country is ahead of Europe and American countries in green and low-carbon technology , but is still using the international standards which now seems to be backward. Therefore, carbon emissions accounting should not use statistical report and estimate method, but use techniques like big data to achieve high-density measurement of carbon emissions, to provide precise and refined data support for carbon emissions trading and standards setting.

At present, the Energy and Environmental Special Committee of China Environmental Protection Federation is starting to formulate the emission reduction accounting method of biomass waste and waste incineration power generation projects, which will be issued by industry standards. It will promote relevant departments to study and introduce carbon dioxide emission reduction accounting methods suitable for China's waste utilization industry.