The following content is compiled from the keynote speech "Carbon Neutrality and the New Connotation of China's Modernization" delivered by Fu Chengyu, Professor of Large-scale Corporate Governance and Innovation Management Practice at Cheung Kong Graduate School of Business, Chairman of China Ishihara, and Party Secretary at the 12th Yangtze River Youth Investment Forum.

1

The significance of carbon neutrality

I want to first focus on the significance of carbon neutrality to China.

my country strives to achieve carbon peaks by 2030 and carbon neutrality by 2060. This is a major strategic decision made by the Party Central Committee after careful consideration. It is related to the sustainable development of the Chinese nation and the building of a community with a shared future for mankind.

——The Ninth Meeting of the Central Finance and Economics Committee

First of all, the level of carbon neutrality has far surpassed carbon itself, and has risen to the issue of sustainable development in China.

It is about realizing the great rejuvenation of the Chinese nation, building a modern and powerful socialist country, and building a community with a shared future for mankind. We need to understand the deeper meaning of carbon neutrality, which is to promote major changes in human society.

Second, the Central Conference clearly stated that carbon peaking and carbon neutrality are a broad and profound economic and social systemic change.

As a social and economic systemic change, everyone, every system, and every organization will be involved, and no one can stay out of the way.

In addition, the Central Conference also re-proposed the "modernization of the harmonious coexistence of man and nature."

my country adheres to the basic national policy of conserving resources and protecting the environment, adhering to the principle of giving priority to conservation, giving priority to protection, and giving priority to natural restoration, and forming a spatial pattern, industrial structure, production method, lifestyle, overall pollution control, and ecological protection response to conserve resources and protect the environment Climate change promotes the continuous improvement of the ecological environment, and strives to build a modernization in which man and nature coexist harmoniously.

So, where are we currently?

According to the central government's statement, my country's ecological civilization construction has entered a critical period of focusing on carbon reduction, promoting synergy in reducing pollution and carbon, promoting a comprehensive green transformation of economic and social development, and realizing the improvement of ecological environment quality from quantitative to qualitative.

In other words, this is not a one-day plan for today or tomorrow, but at least until 2060, we will focus on reducing carbon.

Academia and business circles all view carbon reduction from the perspective of carbon itself, such as energy structure transformation, industrial structure transformation, and so on. In fact, for the country, it is more important to promote major systemic changes in the entire economy and society, so in the future we will see the introduction of a series of reform policies.

2
Carbon neutrality, the only way for sustainable development of enterprises

The impact of carbon neutrality on mankind is profound.

First, major catastrophic weather has become the norm;

Second, sea level rises and glaciers melt.

Scientists predict that if humans do not take effective measures, sea level rise will cause many island countries to disappear by 2050. Some models show that even part of Shanghai will be covered by sea water.

Climate change will not only give rise to major natural disasters, but also ecological disasters, which will cause unpredictable damage to the health of plants, animals, and even people.

Why did almost all advanced economies begin to pay attention to climate change at the same time after the epidemic, with particular attention to laws and measures to accelerate the promotion of policies to address climate change?

Because the new crown epidemic has made the world realize that a small virus can bring the entire human society to a halt. If we do not take timely measures, climate change will harm human society several times as much as the epidemic.

Therefore, almost all major economies in the world and all countries that have signed the Paris Climate Agreement have taken far more proactive actions on climate change than usual.

Under the goal of carbon neutrality in the future, the company's sustainable development capabilities will include three new factors:

Low-carbon development capability

Low-carbon development capabilities will become an important part of the company's sustainable development capabilities. The core of low-carbon development capabilities is low-carbon development technology and R&D capabilities.

Corporate responsibility

In the past, many entrepreneurs in China believed that corporate social responsibility was mainly for public welfare; in the future, companies will have to assume more responsibility for the environment and climate change, and more responsibility for the public and society. These include whether consumer data has been misused, whether consumer rights have been damaged, and the broader scope of responsibility for the environment and climate change.

Corporate Governance Ability

Enterprises must first understand the purpose and significance of their existence.

The ultimate goal of an enterprise must not only be for the development of the enterprise, but must exist for the general public, for the society and even for the progress of human society. Therefore, companies need to have fair, open, standardized, and transparent corporate governance mechanisms and governance capabilities to safeguard and protect the interests of all stakeholders.

Corporate governance capabilities require that all the responsibilities of related parties be incorporated into the company’s governance system. Therefore, our original management system, management procedures, and management ideas must be adjusted accordingly, which means that we have added new capabilities to sustainable development. content.

Now, if we go to the global market and talk about the company’s products and market prices, the structure will be too small; all companies going to the world must talk about social responsibility and corporate governance, because this is the common international language and the common responsibility and responsibility of the company. value. Products and market prices belong to the special language of the enterprise itself. Only when you talk about characteristics on the basis of a common language and common value, can others accept you.

It is the first impact brought by carbon neutrality that enterprises must have the ability to develop sustainably.

3
Under the trend of carbon reduction, enterprises are facing multiple pressures

Climate change urges human society to take larger-scale actions, more active measures, and develop more new technologies to promote the reduction of carbon emissions. However, at present, almost all companies are not well prepared and lacking in technology. First of all, they don't even know how much carbon they emit. It is even more difficult to think about how to reduce carbon. This will cause the market to put pressure on the companies in turn.

In what areas will these pressures manifest themselves?

First, corporate image.

In the past, the corporate image was more dependent on the company’s development capabilities, that is, the company’s growth power or the company’s organic growth, such as how much sales increased, how much profit increased, and how products sold.

Now, these standards are not enough. Today's corporate image has increased the requirements for green, low-carbon, and ecological protection.

Second, corporate value.

Corporate image is not empty, it will directly affect corporate value.

Now, corporate value is directly related to more carbon and less carbon.

Traditional fossil energy companies are facing tremendous pressure and are considered to be detrimental to the long-term development of society. Their corporate image has been hit, which directly leads to a reduction in corporate value.

In the past, the industry leader with such a large market value was our goal to catch up; now, the assets of an American new energy (4.560, 0.03, 0.66%) listed company may be hundreds of times less than these traditional leaders, but the market value has far exceeded the traditional Faucet.

Therefore, although the output and profits of traditional energy companies have not declined rapidly, the decline in market value is the status quo facing the entire industry.

If we look at the new energy vehicle companies like Tesla, Xiaopeng, and Ideal, the market value of the world's top ten traditional auto manufacturing companies is not as high as Tesla's. In terms of sales, the leading traditional car companies may sell tens of millions of vehicles a year; how many vehicles does Tesla sell each year? 400,000 vehicles. But Tesla's market value is higher than the top ten traditional car companies combined, which includes the value of carbon.

More importantly, if traditional enterprises do not take ecological civilization as the main driving direction, it will be very difficult to refinance, and it will become more and more expensive. In the face of market pressure, traditional companies must make greater investment and adopt more radical measures to make plans for accelerating the energy transition and at the same time reduce carbon stocks through technology as soon as possible.

Third, information disclosure.

In the future, in the capital market, any country will require companies to disclose their carbon emissions in their annual reports, which will seriously affect the corporate image and create invisible pressure on the company, prompting companies to take proactive measures.

We can see that the world's large energy companies are pursuing energy transition plans, including the adoption of various measures to implement CCUS (carbon capture, utilization, and storage); Chinese companies have to put more effort into carbon utilization.

For enterprises, it is not only a major challenge, but also a new opportunity for transformation and development.

Fourth, carbon tax and carbon footprint.

Let me talk about the carbon tax first. Simply put, it is to impose a carbon tax on non-locally produced imported products based on the carbon content. The European Union has already pushed forward a carbon "border tax", and the United States will soon follow suit. Once implemented, companies are about to face the pressure of rising costs. Conversely, we need to think about how to use more advanced technologies and processes to further reduce the carbon content in products.

Next, let’s talk about the carbon footprint we often talk about.

In China, many people are not very clear about this concept. What exactly is carbon footprint? The footprints left by each step are called footprints, and carbon footprints are the carbon traces left by various products in different areas of society in the process of being used.

In western developed countries, companies must manage or govern carbon in three areas:

The first area of carbon is how much traditional fuel is used in the process of manufacturing products, and how much carbon is released into the atmosphere through soot after the fuel is burned. In China, what we often say about carbon emissions mainly refers to the amount of carbon dioxide released after the burning of fossil fuels.

The second area of carbon is the amount of carbon dioxide contained in the products produced. In the chemical industry, steel and other industrial manufacturing fields, in addition to a part of the carbon dioxide released after the combustion of fuel, there is also a part of fossil energy used as the raw material of the product, and these raw materials are finally transformed into a part of the produced product. The amount of carbon dioxide in the product formed by different raw materials, different products, and different technological processes is also different. This is the second amount of carbon in corporate carbon management or carbon governance.

The third area of corporate carbon management or carbon governance is how consumers use the product after the company’s carbon-containing products are sold to consumers, and whether they increase or reduce carbon emissions during use. The link is still multiple links and so on. After the company's products enter the society, the management of changes in carbon in the product is also the responsibility of the company. The changing process of carbon dioxide is the so-called carbon footprint in all aspects of the process of enterprise products entering the market.

Chinese companies have not considered their carbon footprint as their responsibility, and hope to consider it earlier. This will become a global concerted action. Be proactive after preparing early. We should be clear that under the general trend of strengthening the global response to climate change, the rules, methods, and systems of the international community on carbon neutrality will gradually become consistent, so we should prepare early and take the initiative.

Every one of us, every unit, every community, every school, every hospital has the problem of reducing carbon, because we all use cars, air conditioners, and electrical appliances. More than 70% of domestic electricity comes from fossil energy, which has a large amount of carbon emissions. Therefore, everyone, every company, and every unit has the responsibility to reduce carbon, and it is necessary to form a green and low-carbon lifestyle. As individuals, how much carbon is consumed and released in a year, and how to reduce the amount of carbon will form a set of rules to turn the reduced carbon into our personal value.

Fifth, green finance.

If the company does not participate in the governance of the global ecology, does not take action to reduce carbon, does not vigorously develop clean energy or develop new low-carbon industries, the company may not be able to borrow money, or the loan price may be higher.

Green finance supports companies committed to reducing carbon, and supports the adjustment of energy structure and industrial structure. Companies that make contributions to the ecological space can use green loans, issue green bonds, and obtain fund investment. Otherwise, they will face great pressure. For all market-oriented companies, if they need to attract fund investment and need to issue green bonds, the first consideration is their contribution to carbon reduction. If there is no carbon reduction behavior, not only will the financing cost be high, the market value and value of the company will certainly not rise.

Therefore, in the long run, no company or anyone can escape the basic requirements of the overall environment and background of ecological civilization construction.

4
Carbon neutrality is a challenge, but also an opportunity

Regardless of whether it is at the national level, corporate level or individual level, carbon neutrality is a major opportunity. What are the specific opportunities?

First, the adjustment of the energy structure.

Whenever any country wants to deal with climate change, the first thing is to adjust its energy structure.

This is huge pressure for China, because my country's energy endowment is dominated by fossil energy.

Last year we consumed a total of 4.8 billion tons of standard coal; in the energy structure, 85% is fossil energy, of which 60% is coal, and green renewable energy only accounts for about 15%. To achieve the goal of carbon neutrality, we must combine the two The ratio is reversed-clean energy or renewable energy accounts for 85%, and fossil energy accounts for less than 15%.

This is the goal we want to achieve from now until 2060. All choices of directions, paths, technologies, and production methods will take place during this transitional period, so make preparations early.

Looking at the world, China is the fastest growing country in the field of clean energy. The installed capacity of solar energy (7.100, 0.00, 0.00%) and wind energy ranks first in the world, and the number of electric vehicles has reached 4 million, which has accounted for 70% of the global market. From now on, China's clean energy will continue to develop to an immeasurable scale at a speed beyond imagination.

Second, energy saving and consumption reduction and carbon inventory reduction.

my country is still in the transitional stage of carbon neutrality. The best and most effective way is to reduce energy consumption first-that is, energy saving and consumption reduction.

At present, China's energy consumption per unit of GDP is more than twice the average level of developed countries. This figure can be completely reduced, saving energy consumption at the source, reducing both pollutant emissions and carbon emissions. China has great potential for energy saving and consumption reduction. In the next 5-10 years, while vigorously developing clean and renewable energy, it should focus on energy saving and consumption reduction. In this way, the inventory can be continuously reduced during the transition phase, and it can also avoid sporty and aggressive behaviors related to enterprises.

How to reduce carbon?

First of all, all companies must carry out the basic work of reducing carbon, that is, start to touch their own homes, and find out how much carbon their companies emit. That is to carry out carbon inventory. It is necessary to check every production device, every production line, and develop algorithms based on the fuels, raw materials used, products produced, technological processes, etc., so as to find out the family background and calculate the current total carbon emissions.

Then, according to the selected technology, engineering, equipment and other conditions and levels, formulate the timetable, road map and construction drawing of the enterprise's carbon peak and carbon neutrality.

The third area of corporate carbon management or carbon governance is how consumers use the product after the company’s carbon-containing products are sold to consumers, and whether they increase or reduce carbon emissions during use. The link is still multiple links and so on. After the company's products enter the society, the management of changes in carbon in the product is also the responsibility of the company. The changing process of carbon dioxide is the so-called carbon footprint in all aspects of the process of enterprise products entering the market.

Third, the adjustment of the industrial structure.

Taking the automobile industry as an example, China's traditional automobile industry is generally lagging behind the global advanced level, but in terms of new energy vehicles, it is almost synchronized with the advanced level. Therefore, the largest market for the development of new energy vehicles in the future must be in China , The fastest market must be in China. China should and may lead the world in the technology and specifications of new energy vehicles.

If China can form a complete set of technical and management specifications in the field of new energy vehicles, it may become a common standard in the field of new energy vehicles in the world.

Fourth, carbon assets and carbon trading.

(1) About carbon assets

The carbon produced by human activities has different sources, from the production and use of traditional fossil energy, from industrial manufacturing, and from people's lifestyles. The carbon dioxide released in different fields can be developed into different carbon products, that is, transforming carbon from a burden into a carbon asset.

At present, the Shanghai Carbon Exchange established by the state only regulates and trades carbon generated by compulsory industries. There is a lot of discussion about this in society, so I won't talk about it here.

I will focus on the issue of non-mandatory emission reduction, that is, voluntary carbon emission reduction, carbon emission reduction and carbon asset development.

This field of voluntary emission reduction involves all aspects, is a very important field, and a field of great achievements. It will occupy an important position and play a major role in the construction of national ecological civilization and in reducing China's total carbon emissions.

For example, what grade of car a person drives, how much fuel is burned and how much carbon is emitted per 100 kilometers, and these figures are calculated. One reduction in driving will reduce a certain amount of carbon emissions. Another example is the simplest way of invoicing. In the past, paper was used, but now electronic invoices can save carbon, and the saved carbon can be converted into carbon assets.

The same is true in other fields. Carbon products in different fields can be developed and carbon assets can be formed. As for the government, it should vigorously and expedite the introduction of corresponding incentive policies and systems, and use the reduced carbon as a special carbon product to give carbon value to these individuals and units. Encourage and promote everyone in the whole society to become the main body of carbon reduction, and a green and low-carbon lifestyle will surely be formed faster.

The development of carbon products in the field of voluntary emission reduction involves cities, development zones, industrial zones, various industries, different units, enterprises, schools, hospitals, institutions, and communities all have the space value of carbon reduction, and they can be developed in different ways. Carbon varieties form carbon assets.

(2) About carbon trading

Our country has just started to operate, Shanghai has already started trading, the first hammer hit 50 yuan a ton, I believe it will rise in the future. It should be noted that the current scope of inquiry and rules and related transaction systems are still localized systems formulated by China's current conditions, and they are also different from international standards and norms.

First, the total carbon emissions of various enterprises in my country are estimated based on the amount of carbon released after the combustion of different fuels. Instead of calculating the amount of carbon emissions based on algorithms developed in real-world situations such as fuels, raw materials, products, processes, and devices.

Second, my country currently only restricts a few major industrial sectors as mandatory carbon emission reduction industries. A small part of the carbon emissions reduced by companies in these industries can be traded on exchanges. This is because: Third, the total carbon emissions of each company in these industries are quotas given by relevant government departments. Under the premise of this institutional arrangement, it is impossible to encourage enterprises to increase investment in carbon emission reduction technology research and development. It is easy for the carbon trading market to become a seasonal trading venue for companies to deal with annual carbon allowances. Although there are exchanges, it is difficult to form a conventional market; although there is the largest amount of carbon in the world, it cannot form the largest amount of carbon trading and carbon value in the world. This can neither promote nor even support China's carbon peak, carbon neutral, better and faster development.

(3) About carbon sinks

Finally, a few words about carbon sinks. Carbon neutrality generally refers to the carbon dioxide emitted by human production activities, and the carbon emitted and absorbed by nature, together to achieve carbon neutrality.

Carbon sink refers to the carbon dioxide that can be absorbed and solidified by nature and human activities. It refers to the process of absorbing carbon dioxide in the atmosphere through measures such as afforestation and vegetation restoration. For example, the ocean can absorb about 30% of the carbon emitted by human activities, such as forests and trees. Both grasslands absorb or solidify a certain amount of carbon dioxide.

Therefore, governments of all countries encourage enterprises and organizations to plant a large number of forests and trees, and trade the solidified carbon as a carbon sink. This is an area that cannot be ignored in achieving carbon neutrality.

What needs to be pointed out is that if companies consider planting forests to increase carbon sinks from the perspective of completing carbon neutral tasks, they should consider those tree species that can be continuously cut and reused and planted repeatedly. Because different trees have a certain growth period, the amount of carbon sequestration in their lifetime is limited. Therefore, if you want to continuously increase the carbon sink, you must have repeated plantings. Other types of carbon sinks should also be repeatable from the perspective of the enterprise in order to continuously add value.

Financial investment requires technology as a core consideration. Financial investment around carbon should take the technology embodied in the corporate carbon value chain as the core, and consider the role of various carbon reduction technologies in adjusting energy structure, adjusting industrial structure, reducing carbon emissions, and developing carbon products. . Regardless of energy structure adjustment, inventory reduction, new product development or industrial structure adjustment, the core of all fields and links lies in technology. Therefore, to make financial investment, we need to firmly grasp technology as the core consideration.

Finally, briefly summarize today’s sharing in three sentences:

Carbon neutrality is a major opportunity for the great rejuvenation of the Chinese nation.

Every one of us, every company, and every unit should not treat carbon neutrality as a problem or challenge, but as an opportunity. Regarding carbon neutrality as an opportunity, we will proactively seize the opportunity.

Carbon neutrality is the only way for the sustainable development of enterprises. Act early, take the initiative, and make it right.

News source: Cheung Kong Graduate School of Business Author: Fu Chengyu