Sinolink: Continued effectiveness of carbon neutrality policies, with supply-side impacts gradually taking effect.

Sinolink released a research report stating that industries with relatively high carbon emissions intensity are still energy-intensive, mostly concentrated in coal chemical industry or industries closely related to the industrial chain such as soda ash, Shanghai Chlor-alkali Chemical, phosphate chemical industry, industrial silicon, etc. Industry differentiation is further intensifying, with the advantages of leading companies further strengthened. The difficulty of adding new capacity for traditional bulk commodities is further increasing, and leading companies can enjoy the central profit increase brought by the weakening of the later cycle property. It is recommended to focus on leading companies that have implemented a large proportion of capital expenditures in the previous round, and the central profit of future corporate earnings will be significantly increased. Sinolink's main points are as follows: Event summary The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the "Comprehensive Evaluation and Assessment Measures for Carbon Peaking and Carbon Neutrality." During the "14th Five-Year Plan" period, the National Development and Reform Commission should work with relevant departments to formulate the "14th Five-Year Plan" action plan for carbon peaking, to ensure the target of reducing carbon emissions intensity by more than 65% compared to 2005, the proportion of non-fossil energy consumption reaching 25% by 2030, achieve the peak of coal consumption and oil consumption, and strive to gradually cover the annual newly added clean energy capacity with the total newly added electricity consumption to the whole society. Starting from 2026, the evaluation and assessment of the provincial (autonomous region, municipality directly under the Central Government) party committees and governments in fulfilling the goals of carbon peaking and carbon neutrality, and accelerating the evaluation and assessment of the progress of comprehensive green transformation of economic and social development. Double carbon assessment as a control indicator has become a key direction for local assessment, which is expected to accelerate the implementation of control measures for high-carbon industries at the local level. The assessment of the "Comprehensive Evaluation and Evaluation Measures for Carbon Peaking and Carbon Neutrality" sets control and support indicators, including indicators such as total carbon emissions, reduction in carbon emissions intensity, total coal consumption, total oil consumption, proportion of non-fossil energy consumption, etc., and support indicators include representative indicators in the areas of energy savings, industry, urban and rural construction, transportation, public institutions, and carbon emissions trading that have supportive effects on carbon peaking and carbon neutrality. According to the requirements of the assessment, the National Development and Reform Commission will propose annual comprehensive evaluation and assessment results for the provincial (autonomous region, municipality directly under the Central Government) party committees and governments based on self-assessment by local governments, department evaluations, on-site verifications, etc., with three levels of excellent, qualified, and unqualified. Provinces (autonomous regions, municipalities directly under the Central Government) where all control indicators and support indicators are met will be evaluated as "excellent"; provinces (autonomous regions, municipalities directly under the Central Government) where one or more control indicators are not met or three or more support indicators are not met will be evaluated as "unqualified"; the rest will be evaluated as "qualified." This means that the double carbon indicators and the consumption of fossil energy have a "veto" effect, and once found unqualified, a written report must be submitted to the Central Committee of the Communist Party of China and the State Council, proposing rectification measures, clarifying the completion deadline, conducting interviews for overdue cases, and the evaluation and assessment results will be used as important references for the comprehensive evaluation, selection, appointment, and supervision of the leadership team of the provincial (autonomous region, municipality directly under the Central Government) party committees and governments. The double carbon assessment is more stringent, with stronger constraints on local governments, and is expected to accelerate the implementation of measures for double carbon work at the local level. The double carbon assessment targets different regions with different characteristics, providing differentiated assessment space and a process management mechanism. According to the assessment measures, when the National Development and Reform Commission jointly reviews the provincial action plans with relevant departments, it should focus on achieving national-level goals, urge local governments to implement requirements such as equivalent or reduced carbon emissions for new (expansion, renovation) "two high" industrial projects, and comprehensively consider factors such as the main functional positioning of different types of regions, industrial and energy structures, and natural resource endowments, coordinate rigid constraints and flexible regulation, and reflect the differentiated requirements. Provinces should adapt to local conditions and establish an important dynamic monitoring and early warning system for data, regularly monitoring national and provincial (autonomous region, municipality directly under the Central Government) indicators such as carbon emissions, coal consumption, oil consumption, new electricity consumption, new clean energy electricity consumption, and issue alerts and warnings to relevant provinces (autonomous regions, municipalities directly under the Central Government) as needed. Based on the establishment of differentiated objectives in different regions and a combined process assessment, a sustainable and stable industry control will be formed, which not only enhances regulatory monitoring but also avoids excessive control and one-size-fits-all impacts. Investment recommendation The voluntary carbon reduction market is expected to accelerate, ushering in an "accelerator" for the green materials market. China has already released multiple methodologies for voluntary greenhouse gas emissions reduction projects, and as the methodologies mature, they will include industrial process emission reduction, waste treatment, energy conservation in transportation, carbon capture and storage, hydrogen energy utilization, real estate and building operations, etc., driving the insulation materials, recycled materials, green hydrogen/green ammonia/green alcohol industries, and other sectors into a clear acceleration period. Risk warning Risks of policy implementation falling short of expectations; risks of changes in the trade environment; risks of demand falling short of expectations; risks of industry collaboration against internal competition execution falling short of expectations, etc.