Liu Yaobin: Refining Price Mechanisms for Green and Low-Carbon Development
Implementing prices for green and low-carbon development is a vital component of improving mechanisms for green and low-carbon development. Transitioning economic and social development toward green and low-carbon models is both a key link in achieving high-quality development and a fundamental strategy for resolving China's resource, environmental, and ecological issues. It is an inherent requirement for constructing a modernization of harmony between humanity and nature.
The green and low-carbon development price is a market mechanism through which product prices fully reflect market supply and demand, resource scarcity, and the cost of green and low-carbon development. Its focus lies in resolving the practical difficulties of realizing the value of ecological products [1] and the urgent issues of carbon pricing related to climate change. Green and low-carbon development pricing primarily includes ecological product pricing and carbon pricing. The price of ecological products should reflect both their scarcity premium and the internalization of their external economies. Carbon pricing internalizes the negative externalities of carbon emissions, making it more flexible and cost-effective. This is determined by the major deployment to accelerate the improvement of systems and mechanisms for implementing the concept that "lucid waters and lush mountains are invaluable assets" [2] and to actively yet prudently promote carbon peaking and carbon neutrality.
The transition from resource and environmental price mechanisms to green and low-carbon development price mechanisms reflects a continuous deepening of the essential understanding of ecological civilization construction. In 2007, the report to the 17th CPC National Congress stressed the need to "perfect the formation mechanisms for prices of production factors and resources that reflect market supply and demand, resource scarcity, and the cost of environmental damage." Entering the New Era, the Third Plenary Session of the 18th CPC Central Committee proposed to "accelerate the reform of prices for natural resources and their products to fully reflect market supply and demand, resource scarcity, the cost of ecological environmental damage, and restoration benefits." In May 2018, the National Conference on Ecology and Environmental Protection proposed utilizing market-based means to improve resource and environmental price mechanisms. In October 2022, the report to the 20th CPC National Congress emphasized perfecting fiscal, tax, financial, investment, and price policies and standard systems that support green development. In July 2023, the National Conference on Ecology and Environmental Protection further proposed perfecting economic policies for green and low-carbon development and strengthening fiscal, tax, financial, and price policy support. In July 2024, the Third Plenary Session of the 20th CPC Central Committee pointed out the implementation of fiscal, tax, financial, investment, and price policies and standard systems that support green and low-carbon development.
Making the Non-Monetized Value of the Ecological Environment Explicit
Implementing price mechanisms for green and low-carbon development is an inherent requirement for deepening the reform of the ecological civilization system. Implementing these policy and standard systems is a vital part of perfecting green development mechanisms, which in turn reflects the effect-oriented nature of deepening ecological civilization reform. Price mechanisms play an irreplaceable role in optimizing resource allocation, promoting resource conservation, and protecting the ecological environment. Incorporating price mechanism reform into the process of ecological civilization construction is a long-term deployment of the Party Central Committee. Deepening this reform requires advancing price reforms for green and low-carbon development, accelerating the improvement of resource and environmental price policies, and pushing for environmental costs to be incorporated into economic operation costs. This strengthens the principle of "polluter and user pays, protector and conserver benefits," promotes carbon reduction, resource conservation, and environmental protection, and continuously meets the people's growing needs for a beautiful ecological environment.
Implementing price mechanisms for green and low-carbon development is the key path to implementing the concept that "lucid waters and lush mountains are invaluable assets." Lucid waters and lush mountains are at once natural, ecological, social, and economic wealth. Natural resources are the material basis for forming and realizing the value of ecological products. The realization of ecological product value is the realistic path to opening the "Two Mountains" [3] conversion channel, enabling the "surplus" and "increment" of ecosystem services contained within "lucid waters and lush mountains" to be transformed into "invaluable assets." Currently, accelerating the realization of ecological product value has become the task of the era in practicing the "Two Mountains" concept. During the "14th Five-Year Plan" [4] and for a longer period thereafter, the realization of ecological product value and its marketization will be the primary lever for green and low-carbon development. In this process, establishing reasonable market-based pricing for ecological products is a key measure. This requires fully reflecting supply and demand in transactions while embodying the external impacts and marginal value of ecological products. This reflects an excavation of the liquidity of ecological resources in terms of factor inputs, emphasizing the explicit manifestation of the non-monetized value of the ecological environment.
Implementing price mechanisms for green and low-carbon development is an essential element of building a community with a shared future for humanity. Achieving carbon peaking and carbon neutrality is both a vital link in building this community and an important means of actively participating in global climate governance. Achieving the "Dual Carbon" [5] goals is China’s "responsibility for promoting the building of a community with a shared future for humanity and an internal requirement for achieving sustainable development"; it is China’s solemn commitment to the world. The national carbon emission rights trading market is an institutional innovation that uses market mechanisms to control and reduce greenhouse gas emissions and promote green development. The national carbon market releases price signals for carbon reduction and provides economic incentives, guiding capital toward industries and enterprises with high mitigation potential, thereby driving innovation in green and low-carbon technologies and promoting green transitions in high-emission industries. The carbon emission rights trading system is a major measure by which China leads global greenhouse gas emission reductions and promotes the building of a community with a shared future for humanity in the New Era.
Perfecting Price Mechanisms for Green and Low-Carbon Development
Improve price formation mechanisms for the efficient allocation of resource and environmental factors. Market-based allocation reform for resource and environmental factors aims to better leverage market mechanisms, maintain market order, and compensate for market failures. This plays a vital role in achieving optimal resource allocation efficiency and maximizing benefits. Since resource and environmental factors possess characteristics of public goods, they experience varying degrees of market failure, necessitating holistic coordination, systematic planning, and collaborative advancement. We must deepen the market-based reform of resource and environmental prices, improve market transaction systems for these factors and for voluntary greenhouse gas emission reductions, and ensure that prices are determined by the market, flows are autonomous and orderly, and allocation is efficient and fair. We must accelerate the construction of a scientifically regulated and efficiently circulating pollutant discharge rights trading market, creating a more effective, vigorous, and internationally influential Chinese-path carbon market.
Innovate price guidance mechanisms for development and security in key fields. Carbon pricing is a vital policy tool for achieving carbon neutrality. However, China's carbon pricing system still faces issues such as insufficient linkage with overall climate policy goals, unclear property rights in the carbon market, and inactive market participants. We must accelerate research and implementation of carbon asset property rights, strengthen climate information disclosure, and provide policy support for confirming carbon asset rights. With the national carbon mission rights trading market as the main body, we should perfect carbon pricing mechanisms and explore price support policies conducive to carbon reduction. We must improve the national unified green power certificate trading system, expand the scope of certificate issuance and trading, broaden trading platforms, strive for full coverage of issuance, and ensure coordination with the carbon market. We should construct international standards and certification mechanisms for green energy and establish product carbon footprint management systems and carbon labeling certification systems.
Perfect reasonable price regulation mechanisms for ecological product pricing. We must improve long-term mechanisms for stabilizing market prices of ecological products. This involves perfecting marketization mechanisms for ecological products, establishing market systems for prices, transactions, taxes, and compensation, and promoting precise matching between supply and demand. We must reduce the costs of converting ecological product value, expand realization models, strengthen financial support, and increase the enthusiasm of local governments and enterprises. For ecological products involving public livelihood and mass demand that significantly impact social development, where market fluctuations would have a major social effect, ecological product value can be realized based on government-guided pricing.
Optimize price supervision mechanisms that promote green and low-carbon development. We must strengthen ex-ante guidance and prevention alongside in-process and ex-post supervision to regulate market price behavior. By continuously summarizing experiences in carbon trading and management, we should formulate or improve operable standards and supporting documents for trading rules, risk prevention, and information disclosure. We must strengthen the coordination between industry self-discipline, social supervision, and government regulation to improve multi-actor governance models. As market entities, enterprises should focus on meeting emission standards, energy conservation, green production, and ecological demonstration. Social organizations and the public should play active roles in environmental education, supervision, green consumption, and expressing environmental demands. The government should establish a national management platform for the carbon market to ensure whole-process supervision and information sharing across departments.
Strengthen the foundational capacity for green and low-carbon development price governance. We must improve monitoring and early warning systems for green development prices. This includes optimizing price monitoring report systems, enriching monitored varieties, innovating monitoring methods, and enhancing the informatization of monitoring to strengthen the link between warning systems and law enforcement. We must improve laws and regulations related to green development prices, accelerate the revision of the Price Law and administrative penalty regulations for price violations, and refine rules for government pricing and price regulation. We must accelerate the promotion and application of green technologies, using the carbon market to drive R&D for advanced low-carbon technologies and induce innovation in energy saving, end-of-pipe treatment, and clean production. This provides shadow prices for green technology investment and R&D, neutralizing the positive externalities that lead to insufficient innovation incentives for enterprises.
Correctly Handling the "Four Relationships" of Green and Low-Carbon Development
Correctly handle the relationship between high-quality development and high-level protection. High-quality development is the prerequisite for high-level protection, while high-level protection is a vital support for high-quality development; both are unified in the green and low-carbon transition of the development mode. Currently, China is implementing the reform of replacing water resource fees with taxes and perfecting market-based systems for environmental factors like discharge rights and carbon emission rights. We are improving mechanisms for realizing ecological product value and horizontal ecological protection compensation to stimulate endogenous motivation for environmental protection. Thus, the practical prerequisite for perfecting the green price mechanism is correctly handling the complementary and mutually reinforcing relationship between high-quality development and high-level protection.
Correctly handle the relationship between an efficient market and a capable government. The core of price mechanism reform lies in correctly handling the relationship between the government and the market. The underlying meaning is to distinguish between the "economic attributes" and "non-economic attributes" of goods and services. Currently, while technical means to overcome the externalities of pollution prevention (i.e., the asymmetry between costs and benefits) are abundant, perfecting green prices requires restoring the economic and price attributes of the environment to the greatest extent possible. We must further clarify the government-market relationship, allowing the market to play the decisive role in resource allocation while the government plays its role better.
Correctly handle the relationship between a unified/open market and orderly competition. Improving the market-based allocation of factors is an inherent requirement for building a unified, open, and orderly competitive market system. The report to the 20th CPC National Congress proposed improving the market-based allocation system for resource and environmental factors. Under this system, the government sets total volume management targets and quotas, while market transactions are conducted for discharge, energy, water, and carbon emission rights. These innovations incentivize technical innovation among market entities with higher efficiency and lower costs. The governance principle for perfecting the green price mechanism is to correctly handle the organic unity and mutual promotion between a unified/open market and orderly competition.
Correctly handle the relationship between external constraints and endogenous motivation. Routine external constraints can gradually evolve into endogenous motivation, which in turn acts back upon the constraints, enhancing their effect and reducing costs. Therefore, we must persist in using the strictest systems and laws to protect the environment and maintain external pressure while stimulating the internal motivation of the whole society to care for the environment. As the world's largest carbon emitter and energy consumer, China bears a heavy responsibility. Currently, China has built the world's largest carbon market by covered emissions, and its expansion is underway. Enhancing the endogenous motivation of enterprises and social investors to provide ecological products is an important proposition for implementing the value realization mechanism. We are establishing market-based transaction mechanisms for resource rights and interests, improving ecological compensation systems, and innovating new mechanisms for the industrial operation of ecological products. The objective requirement for perfecting the green price mechanism is to correctly handle the dialectical unity and mutual transformation between external constraints and endogenous motivation.
(The author is the Party Secretary of Jiangxi University of Finance and Economics) Source: Guangming Daily February 24, 2025