Carbon neutrality hides an overall capital situation

Carbon neutrality hides an overall capital situation

Carbon peaks in 2030 and carbon neutral in 2060. To be honest, it is very difficult for China to achieve the goal of carbon neutrality by 2060. By announcing this goal, China has actually launched an unprecedented global green revolution, which will drive countries’ emission reduction targets to be achieved ahead of schedule. It is equivalent to saying that China has played a global leadership role.

In response to the issue of global warming, China has not only made progress in science and technology, but also changed its development thinking. The Chinese government has begun to realize that climate change is a global issue. If several major countries do not participate, it must control the global average temperature rise within 2°C from the pre-industrial level in this century, and to control the temperature rise to 1.5. Working hard within ℃ (the Paris Agreement reached in 2015) , this is definitely impossible.

Addressing climate change is an inherent requirement of China’s sustainable development and an international obligation that a responsible major country should fulfill. The carbon neutral target is also set by ourselves, not imposed on us by other countries. China must assume the responsibilities of a major country to force the country’s energy transition and development mode change.

A global game without gunpowder

The EU has always dominated the issue of carbon emissions and carbon neutrality. As early as November 2018, the European Commission issued a long-term vision and proposed the goal of achieving climate neutrality including carbon dioxide by 2050.

This invisibly promoted the practice of carbon peaking and carbon neutrality in other countries in the world. However, carbon neutrality is not only an environmental, economic or social issue, but also an international political issue. In the process of reducing emissions, there is a lot of political games among major powers.

From an economic point of view, the issue of climate change is a collective activity dilemma, the so-called “tragedy of the commons.” How to understand? For example, on a grassland, many households such as the Zhang and Li families are herding sheep. The number of sheep exceeds the capacity of the grassland, and the rate of gnawing exceeds the rate of grass regrowth. But everyone I just want to let my sheep nibble more now, and as a result, no one is responsible for this problem until the sheep has gnawed all the grass on this prairie.

In achieving the goal of carbon neutrality, countries around the world also have such a dilemma.

First of all, there will be games between developed countries. For example, Europe accused the United States of “you were the biggest emitter, driving a large-emission car, and living in a big house.” When the Americans heard it, they thought it made sense, but they were not prepared to change their lifestyles. Secondly, there will be games between developing countries and developed countries. For example, the poor countries say “you rich countries are all ranked, and we have not had time to do so, which restricts our development.”

Moreover, the frequency of extreme abnormal weather and natural disasters caused by climate change is increasing. The victims are these small countries, which don’t have much money, so they want rich countries to pay some money. The rich countries think it makes sense when they hear it, but they won’t give money, because “you (poor countries) corrupt governments can buy guns and cannons if you give money ”…between developed countries, developing countries, There will be such a game between developed and developing countries.

Global climate change will affect the economy, society and even international politics. For example, some people say that climate change is good for Russia, because after the glacial permafrost near the Arctic Ocean melts, it becomes arable land. This is true, but climate change is not just an increase in surface temperature, but also extreme weather events, such as hurricanes, floods, and droughts. These events have an impact on all countries on the planet.

Many people know that Greenland’s glaciers are melting at an accelerated rate, and it may not exist in many years. Although many large cities in the world will not be submerged, they will gradually increase their dams due to rising sea levels. The local government has invested heavily in this area. Global climate change will also cause precipitation to be redistributed. This has its advantages and disadvantages. For example, precipitation in some arid areas has increased, but in some major grain-producing areas, it has received less rain.

In addition, under the problem of global climate change, there will be climate refugees, because regional environmental changes cause social conflicts, ethnic conflicts, and hot events, which in turn threaten the geopolitical and international interests of some major countries.

As early as more than ten years ago, the US National Intelligence Service had already provided its main leaders with reports on the threat of climate change to national security. Now, more and more countries are aware of this problem.

As far as China is concerned, 20 or 30 years ago, there were a group of insightful people. A group of scientists and experts pointed out that China cannot follow the industrialization process of Europe and the United States. It should start green energy and renewable energy in the traditional way as soon as possible. , Development of non-fossil energy.

For example, a while ago, a letter from Mr. Qian Xuesen to Zou Jiahua, then Vice Premier of the State Council, was circulating on the Internet in the early 1990s. In the letter, he talked about the importance of protecting the environment in the future, and suggested that China’s automobile industry skip the gasoline and diesel stage and directly enter the new energy stage to reduce environmental pollution. He believes that China has the ability to jump a step and directly enter the new era of automobiles. It now appears that Qian Lao is far-sighted.

We must realize that carbon neutrality is first a political decision, which must be done, and then how to do it. Even if there is no game between countries, China itself wants to be carbon neutral and wants to use such a goal to force the transformation and upgrading of the economic structure. This is a systemic revolution. It is not achieved through several periods of quantified emission reduction, and each industry’s sub-indices are completed.

China’s current carbon dioxide emissions are 9.8 billion tons per year, and carbon emissions account for 28% of the world’s total. The proportion of economic scale (Note: China’s total economy will account for 17% of the world economy in 2020) is far less than the share of carbon emissions. This shows that the quality of our economic development is not high enough, and the energy consumption per unit of GDP is much higher than that of Europe and the United States. The challenge to complete this revolution is:

1.  Other big countries have committed to carbon neutrality after the natural peak, including the United States, which achieved a peak in energy consumption in 2007 and reached a peak in carbon emissions, and then went down. By 2019, the overall emissions have been higher than in 2007. A decrease of 15.6%; the EU reached a peak in energy consumption in 2006, and reached a peak in carbon emissions in the same year. By 2019, overall emissions were down by 22.4% compared with 2006.

China is still in a stage of high-carbon energy development. Energy consumption and carbon emissions in 2019 have increased by 69.7% and 47.2% respectively over 2006. The longer they rise, the higher the peak value and the reduction to zero. The greater the price to be paid.

2. At present, the per capita GDP of the United States has reached more than 60,000 U.S. dollars, Japan’s per capita GDP is nearly 50,000 U.S. dollars, and China’s per capita GDP is only more than 10,000 U.S. dollars. Emission reduction efforts and costs are different at different stages of development. If China wants to achieve per capita GDP growth, it must also achieve carbon neutrality in a short period of time. This has not been experienced by any country in the history of mankind.

3.  China’s current economic growth rate is about 6%, which is more than twice the average growth rate of 2~3% in European and American countries. This objectively causes China’s emissions to be larger than those of European and American countries, and it is more difficult to reduce emissions.

Carbon peaking and carbon neutrality are not only national goals, it also involves tens of thousands of companies, capital market investors, and each of us. The process of achieving this goal will accompany our work, production and life for a long time.

Five ways to change lanes and overtake

To be honest, it is very difficult for China to achieve the goal of carbon peak and carbon neutrality. China needs to have an unconventional development idea of ​​changing lanes and overtaking to achieve this goal, including five major paths.

1. Achieve carbon peak and carbon neutrality with different industrial structures

In 2017, the energy consumption of China’s industrial sector accounted for 65.6% of the total energy consumption of all sectors, and the national industrial added value accounted for 33.1% of GDP, but the unit energy consumption of the industrial sector was twice the national average. Faced with such an industrial structure, energy conservation and emission reduction in related production departments are necessary.

When the European Union’s carbon peak reached its peak in 2006, its service industry accounted for 63.7%; when the US’s carbon peak reached its peak, its service industry accounted for 73.9%. In 2019, China’s service industry accounted for 53.9% of GDP, which is far behind the EU countries and the United States.

It is estimated that by 2030, even if the goal of achieving carbon peaks is achieved, the proportion of China’s service industry can increase to 62% at most. In other words, China’s industrial structure is destined to be different from other countries in achieving the goal of achieving carbon peaks.

2. Adjustment on the production side is indispensable, but adjustment on the demand side is the key

Emission reduction work in various industries such as fossil and energy must be done. The question is how can they have so much room for emission reduction? This requires adjustment of the industrial structure, especially the demand structure. To a large extent, the production structure is determined by the demand structure. We can manage domestic demand, such as raising energy prices, and reducing people’s consumption of energy-consuming products through industrial policies.

But this has substantially increased the cost of the original economic operation. Moreover, China has also assumed the responsibility of the world’s factory, and it has to produce and export products to other countries. If other countries do not adjust demand, it is useless for China to adjust demand alone. Therefore, it is difficult to adjust the demand structure.

3. Use the capital market to promote the upgrade of technology and business models

In 2020, we see that photovoltaics and new energy vehicles are already two very obvious industrial chains, and capital is also very favored. Now, more and more investment institutions are abandoning the original high-carbon industries, turning their investment into a carbon-neutral industry chain, and starting to build a “carbon-neutral portfolio.”

The most typical one is that at the end of 2020, Hillhouse Capital purchased a huge investment of 15.8 billion yuan in the domestic solar monocrystalline silicon leader-Longji shares, and also used 500 million yuan to participate in the fixed increase of shares in the upstream silicon material company Tongwei.

If you sort out carefully, you will find that there are many industries involved in carbon neutrality. For example, the power generation end involves photovoltaic, wind power, and UHV. There are many listed companies in these fields; the consumer end involves new energy vehicles, batteries, charging piles, and hydrogen energy. , Biomass fuels, etc., among which there are many companies such as the “big bull stock” Ningde era, which is a new energy battery; it also involves the use, capture and storage of carbon, and so on.

In addition, some investment institutions emphasize corporate social or environmental responsibilities, and will exclude companies that have not taken active measures to achieve carbon emissions from the pool of investment targets. After the Spring Festival this year, the leading companies in the steel, building materials, and electrolytic aluminum industries in the so-called procyclical sector have risen because under the carbon peak and carbon neutral goals, the scale of small and medium-sized enterprises in these industries will definitely be compressed. And the market share of the top companies will expand-they have become the beneficiaries of carbon peak and carbon neutrality.

4. Mainly rely on more advanced technology and products based on this technology

At present, the total base of China’s carbon emissions is very large. In 2019, it was 9.8 billion tons of carbon equivalent, accounting for 28.8% of the world, while the United States accounted for 14.5% of the world, and the European Union’s share was 9.7%; European and American unit GDP energy consumption It is lower than that of China. In 2014, China’s energy consumption per unit of GDP was 2.4 times that of EU countries and 1.6 times that of the United States.

To achieve carbon neutrality, it is necessary to upgrade energy and energy-saving technologies-relying only on China’s existing technical conditions and energy-saving emission reduction models without major breakthroughs in related technologies. To achieve the goal of carbon neutrality by 2060, there is no What a possibility.

So now, capital power is also promoting breakthroughs in more advanced technologies and product upgrades based on these technologies. It is difficult to achieve carbon neutrality, but it also means that the probability of producing very good companies is very high; if it is achieved lightly, there can be no good companies. If we can use technology to solve the use of carbon dioxide, especially to greatly reduce its cost, then it is a big industrial opportunity.

5. Shift from focusing on fossil energy to focusing on renewable energy

China’s energy endowment and energy structure are different from those of other countries. Coal is burned in the North China Plain in winter because coal resources are abundant and cheap. If the people want to keep warm, they can’t let them use coal, right? Burning coal is better than burning straw, and it is quite expensive to use natural gas. In this way, how to solve the problem of smog and carbon emissions?

In the future, if we want to achieve carbon peak and carbon neutrality, we will definitely shift from fossil energy to renewable energy. According to the vision of the International Energy Transition Commission, by 2050, the demand for global fossil energy may drop by more than 90%, and the demand for wind and solar energy may exceed 75%.

Can this idea be realized? It can be seen from the blackout that occurred in Texas some time ago that wind and solar energy are not without problems. For example, when natural disasters such as blizzards come, the power will be cut off immediately. These problems will be gradually resolved along with the energy transition.

At the same time, if the world will experience a major change in the energy structure by 2050, it will also bring about drastic changes in the status of the country and the status of the national currency, resulting in the internationalization of coal-pound sterling, oil-dollar, carbon currency-renminbi. The problem.

A group of companies will rise in transformation

Carbon neutrality is a systemic revolution and a decades-long opportunity. How can companies seize this opportunity? Below, I use a few examples to explain to you.

1. Take advantage of the system and give full play to the entrepreneurial spirit

Now, an important question discussed by industry insiders is: use lithium batteries to store energy, or use hydrogen fuel cells to generate electricity? This involves a “philosophical question”: how does carbon neutrality count? Lithium is a non-renewable resource. Using lithium batteries to replace fuel is equivalent to replacing non-renewable resources with non-renewable resources. In the future, it will be subject to lithium, and lithium is very expensive.

Hydrogen energy is different. It can be produced on-site and can be produced with renewable electricity. The problem is that it is costly. Hydrogen fuel is now used in cars, and the fuel price is much more expensive than current gasoline. To put it bluntly, technology must be used to make hydrogen fuel more economical and applicable.

To achieve this goal, in terms of the business model, the market needs to expand rapidly, from the original use in one city to the present few savings.

The Shandong Ministry of Science and Technology is conducting pilot projects. There are large industrial enterprises in Shandong, and many by-products are hydrogen. Many people questioned: Japan’s Toyota has failed to “make” hydrogen cars for so many years. Why can we “make” successful?

Engineers can think this way, but I think entrepreneurs can’t think so. When it comes to technology, there are always a lot of difficulties, but the only thing that cannot be quantified is entrepreneurship. Compared with Japan, China has a large land area and a wealth of talents. There is no country in the world to build UHV power grids, hasn’t China also “made it”?

However, if a company wants to deploy hydrogen energy, I suggest: Don’t “make a great leap forward”, and make a “small and long-term” investment, such as spending a portion of the money every year to invest continuously, and pay attention to the changes in policies and the market. Because hydrogen energy is a capital-consuming industry, if you make a desperate move, the capital will be consumed in the end, and it will affect the basic business of the company. This is more than the gain.

At present, the State Grid and other central enterprises have successively announced action plans to achieve carbon neutrality; local governments such as Beijing and Shanghai have also successively announced their own goals, and some have also stated that they will achieve a reduction in total carbon emissions by 2025, which is higher than that of the state. The carbon peak target is 5 years ahead of schedule.

On this issue, I think Professor Lin Yifu ’s view that  it is impossible for a late- developing country to learn from the United States at once, and must have industrial policies” is correct. Are there any problems with the industrial policy? Of course there are, such as inaccurate, there will be a problem of fraudulent subsidies. But it is not possible without an industrial policy. This is our institutional advantage.

2. Become a “pioneer” or follow in their footsteps

The process of achieving the goal of carbon neutrality is a complete energy revolution. Even if there is oil in the future, it is likely that most consumers will no longer use it. This is also the reason why Saudi Arabia is developing new energy. In the next 100 years, fossil fuels will be replaced.

During the “Twelfth Five-Year Plan” and the “Thirteenth Five-Year Plan” period, China has already implemented a double-point system for the automobile industry (Note: The so-called double-point refers to the average fuel consumption of passenger car companies and the points of new energy vehicles. Parallel management approach, each auto manufacturer needs to produce new energy vehicles) , if the auto manufacturer’s points are negative, then it will have to pay. Europe has begun to punish large car companies heavily. In the future, fuel vehicles will definitely be subverted.

For enterprises, this is equivalent to the analog technology of mobile communications being subverted by digital technology. If the technical route is wrong, it will lose everything. So now BMW and Mercedes-Benz are particularly worried that they will become Nokia and Kodak back then. They are far behind and slower than Chinese and Japanese companies in the field of electrification.

Recently, I frequently visited car companies and found that everyone’s perception of carbon neutrality is “three levels of differentiation”:

The first level is foreign companies. Their Chinese employees have more urgency than headquarters employees because they feel the challenges brought by the development of China’s new energy automobile industry and the implementation of carbon neutral goals;

The second level is some domestic car companies. They have seen the opportunity and have already acted. Of course, there are also risks here;

The third level is some other domestic auto companies. They don’t feel it. They always think that they can complete the target. They have not realized that the change of energy-driven form is disruptive to the entire auto industry.

The automobile industry is one of the main parts of the manufacturing industry, involving hundreds of related industries. It is also a concentrated expression of the strength of a country’s manufacturing industry. If China’s auto industry can “overtake” auto companies in Japan, the United States, and Germany, then this will promote the upgrading of China’s manufacturing industry and economic transformation.

In addition to traditional car companies, large-scale platform-based economic companies have also joined the ranks of car manufacturers. Xiaomi and Didi have also announced car manufacturing a few days ago. In the future, companies such as Bytedance may join. Under the impetus of the three forces, China’s auto industry will be very imaginative.

In fact, electric cars are not made of cars, they are made of new work and life styles with four wheels. This is redefining the car. China’s current round of smart electric vehicle trends will also determine whether the entire manufacturing industry and technological forces can truly get rid of the constraints of the United States in the future. The current technical difficulty lies in how to continuously provide cost-controllable green power.

The choice of technical routes and the use of energy forms is an adventure. The automotive industry is very mature, but the digital and electrified automotive industry has just entered an ascending track, and the companies entering the market have just stood at the starting point.

We predict that it will take 20 to 30 years of rapid development before it can mature. Companies planning to lay out the track should seize this opportunity sensitively and keenly. Of course, there will be many “pioneers” in it, but there will be several “pioneers”, and people with foresight will catch these “pioneers” and follow in their footsteps.

3. Do everything possible to convert inputs into assets

China has a large population base and requires a lot of manufacturing, which has created many “big carbon emitters”. This kind of industrial restructuring is not like many local governments established Internet towns in the past few years, which changed after just hanging up a sign. At the end of last year, the southern part of the country once imposed power cuts, and some places could not use electricity. One of the reasons was that the targets were not met during the 13th Five-Year Plan.

The key is whether we can quickly understand this problem and seize the opportunity. On the surface, it is a cost, and many companies are unwilling to spend money to transform themselves. Regarding this issue, you can refer to the process of digital transformation. Facts have proved that the first company has benefited. At that time, it used money for technological transformation and even transformation of systematic production processes. Later, it became more competitive and had a larger market share.

The same goes for carbon neutrality. It is not enough for companies to passively deal with and change equipment and equipment, and they must turn their money into emission reduction credits as much as possible. For example, a steel plant has a carbon dioxide emission quota of 100 tons, but only 80 tons of carbon dioxide emissions were emitted that year through technological transformation. Then the remaining 20 tons (amount) are carbon assets and can be traded.

Now, China already has a carbon exchange. Because of the large emission reductions, in terms of potential, China will definitely be the world’s largest carbon trading market in the future. With the development of China’s carbon trading market, we must gradually strengthen the financial market, realize the so-called capital flow as soon as possible, and encourage enterprises to properly merge and reorganize with European and American companies through capital markets.

In addition, in the future, every company will have a carbon inspection certificate in the industrial and commercial taxation, and the state will collect taxes or pay fees on this basis. Moreover, I estimate that this may be the first to be implemented in large industries.

For my country, will the implementation of a carbon tax when carbon trading has been implemented will increase the burden on enterprises? Choose to impose a carbon tax under the resource tax, consumption tax, and environmental tax, or as an independent tax? How to avoid double collection and increase the burden on enterprises? These are all issues that need to be studied carefully.

All in all, carbon neutrality is not an instant vent, but involves a series of energy structure adjustments, a series of technological advances, and a series of changes in development methods. A group of companies may be destroyed, and another group of companies will rise during the transition. In my personal judgment, the opportunity for carbon neutrality has just begun.

This article comes from WeChat public account: Zhenghe Island (ID: zhenghedao) , Oral: Guan Qingyou, Editor: Yang Yuting, Ye Zhengxin, Pan Lei

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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