Literature Review on Forest Carbon Sink Market

Yuan Chaoxiang,Wang Shichao,Zhu Guiqing,Li Yingyun

(Southwest Forestry University,Kunming,Yunnan 650224)

Abstract:This paper summarizes the concept of forest carbon sink and the necessity,feasibility and characteristics of carbon sink market,and puts forward the significance of carbon sink.At the same time,it analyzes the existing forest carbon sink trading mechanism and international market operation mechanism in the forest carbon sink market and government policies,as well as the main challenges and prospects for the development of the carbon market in the future.

Keywords:forest carbon sink;carbon trading;CDM;operation mechanism

With the development of industrial society,the burning of fossil fuels releases a large amount of carbon dioxide,causing climate warming and air pollution.In China"s social development,we must control greenhouse gas emissions,change the mode of economic development,and take the road of green and low- carbon development. So far, the government has taken a series of measures and made great progress in reducing carbon dioxide emissions,but it is still in a carbon debt.It is necessary to improve the carbon trading market to enhance the intrinsic motivation of the main body of emission reduction,and at the same time to enhance the enthusiasm of the main body of emission reduction.

I.Concept of Forest Carbon Sink

(i)Forest Carbon Sink n Sink

Regarding the definition of carbon sink,Cui Junfu believes that carbon sink is an activity of carbon capture and storage,and the carbon capture process can be divided into man-made and natural ones.The natural process is to fix carbon dioxide in the plant body or carbon stored by soil respiration through photosynthesis.Man-made processes can use CCS to capture and store carbon from power plants at fixed location[1].Zhang Ying believes that carbon sink refers to the process,activity and mechanism of removing CO2 from air by carbon depository in nature[2].Forest carbon sink refers to the process,activity and mechanism of removing carbon dioxide from the air.It refers to the amount or capacity of the forest to absorb and store carbon dioxide.

(ii)Forest Carbon Sink and Forestry Carbon arbon Sink Sink

Wang Jing believes that forest carbon sink is different from forestry carbon sink.Forestry carbon sink is an activity combining afforestation,forest management and carbon sink trading market.It has nature and artificial double attribute.Forest sinks are only natural.According to the existing literature,there is no significant difference between forest carbon sink and forestty carbon sink,and forest carbon sink transaction also includes plantation forest trading mechanism.Therefore,this paper does not make a clear distinction between the two and regardsthemasconsistent[3].

II.Forest Carbon Sink Market Trading

The Outline of The 13th five-year Plan clearly states that China will launch national carbon emission trading in 2017 to promote the construction of a unified national carbon emission trading market.The trading principle of forest carbon sink is to regulate carbon emission by economic means.In the past,some enterprises did not assume economic or social responsibility for the environmental damage caused by carbon dioxide emissions,but caused varying degrees of damage to the living environment of others.Using the principle of carbon sink trading,enterprises pay for the carbon dioxide emissions,in order to obtain more profits,enterprises will reduce the carbon dioxide emissions.Through a reasonable carbon pricing mechanism,enterprises do not have to worry about losing their competitive advantages due to increased costs caused by technological transformation or improved operation,so as to achieve the purpose of stimulating technological and management innovation.At the same time,planting carbon sequestration forests will absorb the carbon dioxide emitted,and the fixed carbon dioxide quota of carbon sequestration forests will be paid and purchased by using the carbon trading principle,so as to achieve the balance of carbon emissions.Wang Runzhuo think the body of the carbon market currently include three kinds:one kind is suppliers,one is the demand side,the other kind of acts as the intermediary is the rise of financial institutions.Financial institutions include exchanges and trading platforms,banks,brokers,low-carbon insurance and other financial institutions[4].

(i)Necessity of the Forest Carbon Sinks Market arket

Global warming is a worldwide problem and affects the future development of human society.The Paris agreement came into force in 2016.The marrakesh climate conference adopted a declaration of action to further promote the implementation of the Paris agreement,marking a new stage in global climate governance.In the same year,China international trade center held the China international circular economy exhibition in Beijing.China will launch a unified carbon market in 2017.The construction of forest carbon sink market is a measure to cope with global climate change.The carbon market is a relatively complete and feasible mechanism,which not only puts forward carbon emission reduction targets,but also provides multiple emission reduction options,providing good opportunities for enterprises and individuals,so as tobetter realizethetradeof forest carbon sink[5].

(ii)Feasibility of Forest Carbon Sink Market arket

China has launched 3 years of pilot operations in 7 regional carbon trading markets.The government has issued a notice on effectively implementing the key work of launching the national carbon emission trading market,which makes a unified arrangement for the construction of the national carbon market and requires that the national carbon market be launched in 2017 to promote green transformation through marketization.

(iii)Characteristics of the Current Forest orest Carbon Sink Market arket

Zhao Lixiang,Hu Can believe that market environment,policy factors and climate change are the main influencing factors of carbon trading price,and energy price also has a certain impact on carbon trading price,but the effect is not obvious[6].Wang Jing believed that the change of carbon sink market price was mainly caused by the change of individual price,rather than by the supply and demand of society.It is also believed that the project investment and the generated"carbon credit"lack certain liquidity.

(iv)Significanceof Carbon Sink Market arket

Zhang Hao believed that the construction of China"s carbon sink market mainly includes two aspects from the macro perspective:On the one hand,it is conducive to ecological construction and ecological security;On the other hand,it can better deal with the relationship between carbon dioxide emissions and economic development[7].Li Yang put forward the value of four aspects of economy,society,culture and ecology from the value dimension.Economic value includes developing carbon sink tourism industry to promote national income,innovating new functions of carbon sink industry,and developing financial derivatives to enrich financial market.Social values include government support and guidance for people to participate in low-carbon environmental protection,making a certain contribution to social development and green.Ecological value includes mitigating global climate change and adjusting ecology to create a better living environment for people.Cultural values enhance people"s awareness of green carbon sink and green civilization,deepen their understanding of environmental protection concepts,and enable people to spontaneously practice lowcarbon and environmentally friendly lifestyle[8].

III.Market and Government Policies for Forest Carbon Sequestration

(i)Forest Carbon Sink Trading Mechanism anism

Pan Jiahua believes that the theory of carbon emission right trading is derived from the Coase Theorem,that is,in the case of clear property rights,resources can be optimal allocation in the market.This theory of property rights trading was then used in environmental economics analysis,compared with the Pigouvian Taxes Analysis,and draw the conclusion that if the total pollutant emissions were the same as the emissions equilibrium under the Pigouvian Taxes,the rate of Pigouvian Taxes would be the same as the market equilibrium price of emission rights.In other words,Pigouvian Taxes and Coase Theorem can achieve the same efficiency in pollution control[9].Carbon trading mechanism is a policy tool based on carbon price theory.The government sets the total carbon emission limit for enterprises by introducing the cap-and-trade mechanism.If the enterprise"s emission exceeds the limit set by the government within the specified period,it needs to purchase the corresponding quota through the carbon trading market to reach the standard,or it will pay a heavy fine.Enterprises can also choose to reduce carbon emissions through lowcarbon technology transformation or improvement of operation and management,and obtain economic benefits by selling the surplus emission quota in the carbon trading market.Each enterprise will choose a more favorable way to achieve carbon emission standard based on its own situation and cost benefit accounting,or purchase emission quota through its own emission reduction and carbon market.

(ii)Existing International Market Operation ation Mechanism anism

1.Current Situation of International and Domestic Carbon Sink Market

Global carbon trading has come a long way since 2005.Currently,there are four major international carbon exchanges: the European Union"s European emissions trading system(EU ETS),the United Kingdom"s emissions trading system(ETG),the United States"Chicago climate exchange(CCX),and Australia"s Australian national trust(NSW).7 carbon emission right exchanges in China,namely Beijing environment exchange,Tianjin carbon emission right exchange,Shanghai environment and energy exchange,Shenzhen carbon emission right exchange, Guangzhou carbon emission right exchange,Hubei carbon emission right exchange and Chongqing carbon emission right exchange.By September 2016,a total of 120 million tons of carbon dioxide had been traded in 7 pilot carbon market quota spot markets nationwide,with a total transaction valueof morethan 3.2 billion RMB.

2.Operation Mechanism of International and Domestic Carbon Sink Market

Zhang Rui,Cao Fangping and others believe that there are mainly three development mechanisms according to the fair and differentiated principles formulated by the third conference of the parties(COP3)to the United Nations Framework Convention on Climate Change.Including the clean development mechanism (CDM),the emissions trading mechanism (ET), and the joint implementation mechanism(JI).The development mechanism is not limited to the carbon market operation mechanism formed by the protocol.Relevant domestic carbon trading markets have been established in the EU,New Zealand and other regions through domestic legislation,which are also important components of the global carbon market[10].China"s main development mechanism until 2012 was the clean development mechanism (CDM),which stopped approving CDM projects after 12 years.

IV.Research Review and Prospect

(i)Research Review of Forest Carbon Sink n Sink Trading Market arket

The development of forest carbon sink trading market is an effective means to mitigate carbon dioxide emissions.In order to operate Chinese carbon market better,it is necessary to learn main carbon trading mechanism from the perspective of global.At present,China has launched a national carbon trading market,which is mainly regulated by economic means and optimized by auxiliary government policies.Strengthen the cooperation with the global market,so that Chinese carbon trading market can reach the international standards,so that Chinese carbon trading operations are more conducive to access to the international market.

(ii)Development Prospect of Forest Carbon arbon Sink Market arket

The Chinese national carbon emission trading system launched in 2017 will become the world"s largest carbon market,according to the 2017 China Carbon Market Forecast and Outlook Report.More than 7,000 companies across the country will meet the requirements,accounting for about half of the country"s total carbon emissions of 405 billion tons of carbon dioxide.This means that after the national carbon market is launched,the scale of China"s carbon market will greatly exceed that of the European Union,the largest carbon market in the world,and the global carbon market pattern will change[11].