BEIJING, March 30 (TMTPOST) – Zhou Xiaochuan, the former governor of the People’s Bank of China and vice chairman of the BFA, said that there are theoretically optimal carbon reduction instruments for multiple objectives, highlighting the need to find optimal solutions. 

He made the remarks during the Boao Forum for Asia (BFA) 2023 Annual Conference’s sub-forum on “Carbon Neutrality: Difficulties and Breakthroughs” on Wednesday.

The BFA has been organizing annual meetings since its inception in 2001, with over 20 meetings held to date. A significant number of these meetings have focused on topics related to environmental protection and sustainable development. At the 2021 BFA Annual Conference, the topic of carbon neutrality became a major focus, with many participants agreeing that it represented the future direction for development. As a result, the BFA 2023 created the “Carbon Neutrality: Difficulties and Breakthroughs” session. Participants at this session engaged in extensive discussions on achieving carbon peaking and carbon neutrality while maintaining a balance between security and development. They explored various strategies and solutions to address the complex challenges associated with transitioning to a low-carbon economy.

At the forum, Zhou acknowledged that the global response to climate change is facing significant challenges and dilemmas. He noted that the level of consensus at the UN Climate Change Conference last year was not as high as during the Paris Agreement due to various factors, such as geopolitical conflicts and energy crises, which led some governments and companies to prioritize other issues over carbon reduction. “It’s unrealistic to expect all organizations, including governments, to prioritize and solely target CO2 emissions at present due to the multi-objective nature of the issue,” Zhou said.

According to Zhou, price-based tools are necessary to ensure security, growth, and equity during the process of achieving the goal of controlling temperature rise and splitting carbon reduction goals into individual years. He believed that price instruments encompassed more than just the price of carbon dioxide, and also included taxes, subsidies, and carbon market quotas. “On the other hand, non-price tools involve corporate awareness, planning, and guided investment,” Zhou said. He proposed that in implementing plans and guiding investments, it was better to give companies incentives, rather than let them lose money. When well-combined, price-based and non-price-based instruments can generate approximately the optimal price.

Zhou observed that many financial institutions were taking steps to reduce carbon emissions, such as using green energy in data centers and adopting carbon-free practices in their offices. “However, it is more important for their portfolios, including investments, credit, and other financial activities, to move towards zero carbon to achieve carbon neutrality,” he stressed. Furthermore, he believed that the financial industry was well-suited to develop and operate carbon markets and related derivatives, with appropriate regulations in place. This would enable price signals in the carbon market to facilitate optimal coordination between multiple objectives and instruments, while building and operating the carbon market.

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