Carbon markets are like real estate markets

　　Under the spotlight, China's national carbon emission trading scheme officially launched on July 16, 2021. The first successful carbon trade was priced at 52.78 yuan per ton, with a transaction volume of 160,000 tons and a total transaction value of 7.9 million yuan. With the scheme finally in place, discussions have been lively. Due to its trading format and strong financial attributes, some compare the carbon market to the stock market. Others, due to its government-set quota system, liken "carbon emission allowances" to ration coupons. These analogies are interesting and insightful. However, after careful consideration, I find that the carbon market not only shares characteristics with the stock market but also resembles the real estate market.

　　First, the policies related to carbon trading have a strong local attribute, much like the real estate market, with policies varying from place to place.

　　Since 2011, eight provinces and cities in China have successively established carbon trading pilot programs. However, due to differences in economic development levels and industrial structures across regions, the scope and standards for industries included in carbon trading vary. This directly leads to significant differences in carbon prices across regions: during 2020, the average transaction price of carbon emission allowances in Beijing ranged from 73 to 87 yuan/ton; during the same period, the carbon price in Chongqing was only 5.576 yuan/ton. Isn't this reminiscent of the disparity in housing prices across different cities? Meanwhile, the European carbon price is approximately 50 euros per ton. In comparison, China's carbon price still has room for growth. Article 21 of the "Measures for the Administration of Carbon Emission Trading (Trial Implementation)" states that key emission units and institutions and individuals that meet national trading rules are the trading entities of the national carbon emission trading market. The mention of "individuals" as trading entities raises the question: can ordinary people participate in "carbon trading"? Currently, it's difficult, due to the high barriers to entry. During the trial run, taking Beijing as an example, only enterprises in specific industries with annual carbon emissions exceeding 5,000 tons were included. The first batch of enterprises formally included in the national carbon trading market consisted of only 2,225 power generation companies. Therefore, the path to "getting rich by trading carbon" is currently not feasible, but it hasn't been completely blocked.

　　It's certain that more and more industries and enterprises will be included in the carbon trading market, and different benchmarks will be set for different industries. The details of these benchmarks will become increasingly clear, much like the continuously issued real estate policies, adjusted and refined, tightening and loosening, to achieve macroeconomic regulation.

　　The vast majority of industry professionals have yet to experience the carbon trading market firsthand. A friend asked me whether data centers will be included. Before answering this question, let's do some calculations.

　　Let's assume a small-scale data center with a planned capacity of 10,000 servers, with a single server power of 250w, a cabinet utilization rate of 70%, and a PUE of 1.35. Then its annual power consumption is: 10000 servers * 0.25kw/server * 70% * 1.35 * 8760h = 20695500kwh.

　　We use coal-fired power generation as a reference to calculate its carbon emissions. According to a common understanding, saving 1kwh of electricity saves 0.4kg of standard coal, correspondingly reducing 0.997kg of carbon dioxide, or 0.272kg of "carbon." Therefore, the annual carbon emissions of this small-scale data center with a planned capacity of 10,000 servers are 5629.176 tons. In other words, based on Beijing's standards, if industry restrictions are relaxed, even a small data center would be clearly regulated by the carbon trading market.

　　The temporary exclusion of the data center industry from carbon trading, instead promoting energy conservation and emission reduction through special energy-saving supervision, can be seen as a temporary exemption, a special consideration.

　　Cherish every gram of carbon emission allowance, because tomorrow it may have to be exchanged for real money.

　　The carbon trading market is a carrier of the virtual economy, and the virtual economy must be supported by the real economy. There are two paths between the virtual economy and the real economy: one is from the advantages of the real economy to the value of the virtual economy, and the other is to implement the value of the virtual economy in the advantages of the real economy. Even if prices fluctuate, there will always be a day when they return to their value. This cycle continues, combining the virtual and the real, moving closer to the great goal of carbon neutrality.

　　At this point, I have to admire the top-level design of the carbon trading market. From the outset, efficient rules were established, using the leverage of the virtual economy to drive the rapid development of the real economy and accelerate the progress towards the goal. It's truly brilliant!

　　Finally, I want to reiterate a point: we cannot consider the task of carbon emission reduction complete simply by cutting off the electricity, because the right to use energy is the right to development, and the right to development is a fundamental human right. What we should do is replace carbon-based energy with clean energy, reduce carbon emissions, and serve the strategic goals of "carbon neutrality and carbon peak." This is also the sole purpose of establishing the "carbon emission trading market".

Source: Zhu Zi Talks About Carbon Neutrality

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