"Carbon trading" forced steel to eliminate backward production capacity

Against the background of climate change and the development of a low-carbon economy, the Chinese government clearly stated that during the 12th Five-Year Plan period, carbon emission rights trading pilots will be established to gradually establish a carbon emission trading market and approve Beijing, Tianjin and Shanghai. Seven provinces and cities in Chongqing and other provinces and cities have carried out carbon emissions trading pilot projects, and seven provinces and cities have promised to start this work by the end of 2013. In fact, prior to the “carbon trading” pilot, many provinces and cities have set up their own carbon emission rights exchanges or energy and environmental exchanges, but these exchanges are mostly in an embarrassing situation where there is no market, and there are few There are high energy-consuming companies involved. According to the announced plan, the power, steel, non-ferrous metals, building materials, petrochemical, and chemical industries have become the first batch of industries that have been forcibly included in the pilot. Then, what impact will "carbon trading" have on the steel industry and how to solve the problems that come with it?

Avoid the risk of damage from trade frictions. After the international financial crisis, international trade protectionism has risen. In order to protect the domestic market, the United States, the European Union and other developed countries and regions as well as Brazil, India and other developing countries have increasingly imposed trade restrictions on China. At present, carbon tariffs aimed at energy conservation, emission reduction and environmental protection are becoming more and more popular among countries as a new means of trade protection, and developed countries have used this to achieve the purpose of curbing the rise of emerging countries. The "U.S. Clean Energy Security Act" clearly states that since January 1, 2020, countries that have not implemented carbon emission reduction policies will have to enter the United States market after purchasing carbon emission allowances and carbon emission permits from the United States. The implementation of "carbon trading" can avoid other countries from refinancing carbon tariffs on China's export products, thereby eliminating the double taxation problem and also avoiding the risk of Chinese enterprises' damage in international trade frictions.

Increase the company's production and operating pressure. Whether in the international market is protected by carbon tariffs traded by other countries or by the enforcement of “carbon trading” in the country, corporate costs will increase, often including explicit costs and hidden costs. Explicit costs are mainly caused by the improvement of production processes, the renewing of production equipment or the purchase of environmentally friendly production raw materials with higher purchase prices. Implicit costs mainly refer to the opportunity costs incurred by companies participating in “carbon trading”, such as abandoning production parts. Companies that have higher carbon emissions but can bring higher profits to the company. The implementation of the “carbon trading” will cause quite a number of small and medium-sized raw material companies with high energy consumption and low efficiency to be eliminated by the market. Even large enterprises with strong capabilities will increase R&D costs due to the development of new energy-saving and emission-reduction technologies. Therefore, in the short term, companies will face pressure from production and operation.

The export competitiveness has declined. Steel is a labor-intensive and energy-intensive industry with a relatively high carbon emission density. The cost pressure caused by the implementation of "carbon trading" will be passed on to the product price, which will weaken the price advantage of China's steel products in the international market, leading to a decline in the competitiveness and market share of the product, and an impact on the company's international competitiveness.

Promote structural adjustment and transformation and upgrading. The implementation of "carbon trading" will cause certain adverse effects on China's iron and steel enterprises in the short term, but in the long run, it can speed up the formation of backward mechanisms to eliminate backward production capacity, and provide opportunities for the transformation and upgrade of China's raw material industry. The “12th Five-Year Plan” period is a crucial period for the transformation of China’s economic structure. The task of transforming and upgrading the steel industry and eliminating backward production capacity is even more urgent. Although the implementation of "carbon trading" will increase business costs, but it can also force companies to actively carry out technological innovation, vigorously develop energy-saving and environmentally friendly production technologies, improve the level of energy consumption and production efficiency, eliminate high energy consumption and low efficiency companies, and promote the optimization of industrial structure .