Liu Shijin: What is currently both important and urgent regarding carbon accounting and ecological accounting?

Executive Summary ☞ China’s true growth potential still lies in its structural potential. For the driving forces of medium-speed growth, we propose a ‘1+3+2’ structural potential framework. The ‘1’ refers to metropolitan areas and city clusters as the lead engine—opening up physical space and kinetic potential for China’s next phase of high-quality, medium-speed growth. This sector alone accounts for 70–80% of China’s growth potential over the next five to ten years. ☞ If demand remains weak while the Producer Price Index (PPI) stays high, squeezing profits of mid- and downstream enterprises, visible economic risks are accelerating—and the economy may slide into an adverse ‘stagflation-like’ scenario characterized by low growth, high prices, declining efficiency, and mounting risks. The current moment is a critical juncture for macroeconomic regulation; accurate assessment of the situation and timely policy intervention are essential to avoid such an outcome. ☞ Recently, some real estate firms collapsed after excessive expansion; some local governments pursued growth at all costs, leading to unsustainable hidden debt burdens; and adjustments to energy and industrial structures under the dual-carbon goals have intensified structural contradictions. These issues can no longer be postponed—and in many cases, cannot be delayed further. Yet their resolution demands careful balancing between short-term and long-term considerations, and between objectives and instruments. We recommend adopting a strategy of ‘long-term planning, firm measures, and soft landings.’ ☞ Carbon reduction must not proceed in isolation. Instead, it must be grounded in China’s national conditions, pursuing integrated progress on carbon reduction, pollution control, ecological restoration, and economic growth—the ‘four-in-one’ approach. Carbon reduction must not be campaign-style; during the green transition, the principle should be ‘new systems first, old ones phased out later’—as emphasized by the central government: ‘establish first, dismantle later.’ Carbon-reduction targets must not be misaligned: currently assigning quotas by industry or region may inadvertently allocate more carbon resources to entities with low carbon productivity. ☞ A foundational institutional innovation is establishing carbon accounts, ecological accounts, and green responsibility accounts. The first step is to advance carbon accounting and ecological accounting. Accounting forms the bedrock of green transformation. Whether administrative or market-based approaches are adopted, they all presuppose accurate, science-based accounting—a prerequisite that remains critically underdeveloped and insufficiently prioritized to date. ☞ Building upon carbon and ecological accounting, carbon and ecological accounts should be established, culminating in green responsibility accounts—covering carbon reduction, conventional pollution control, ecological restoration, and economic growth—for governments at all levels (national, provincial, municipal, district), enterprises, and individuals. These accounts will clarify each stakeholder’s emission-reduction responsibilities. — Liu Shijin, Academic Advisor of the China Finance 40 Forum (CF40), Vice Chairman of the Economic Committee of the 13th National Committee of the Chinese People’s Political Consultative Conference (CPPCC) The ‘$10,000 per capita GDP’ Threshold Demands Close Attention to Structural Potential The ‘$10,000 per capita GDP’ milestone is an exceptionally sensitive and distinctive node in the economic growth process. Once per capita GDP surpasses $10,000, the most conspicuous change is the deceleration from high-speed to medium-low-speed growth—a shift driven by a fundamental transformation in growth drivers: from imitation to innovation, from scale expansion to efficiency enhancement, and from ignoring to addressing escalating social inequality.

What positive effects does achieving carbon neutrality and peak carbon emissions have on China’s economic development?

The carbon market is a market that prices carbon emissions: the government allocates annual carbon emission quotas to enterprises; enterprises that reduce emissions through technological upgrades and efficiency improvements can trade surplus quotas on the market, while those exceeding their quotas must purchase additional allowances at their own expense. On July 16, 2021, China’s national carbon emissions trading market officially launched, covering over 2,000 power-generation enterprises and more than 4 billion tons of carbon emissions. By the end of August 2026, the market had incorporated 3,680 key-emission enterprises, with cumulative trading volume reaching 961 million tons and a total transaction value of RMB 65.699 billion. Coverage has expanded to sectors including steel, cement, and aluminum smelting, enabling effective regulation of over 65% of nationwide CO₂ emissions. The voluntary carbon market (i.e., certified emission reduction trading) launched in January 2024; by the end of August 2026, it had registered 41 voluntary emission reduction projects, with a cumulative trading volume of 21.7068 million tons and a transaction value of RMB 1.737 billion. According to the ‘National Carbon Market Development Report (2026)’, over the past five years, the national carbon emissions trading market has reduced society-wide mitigation costs in the power generation sector by approximately RMB 56.8 billion, generating RMB 35.69 billion in emission-reduction revenue for 1,173 technologically advanced enterprises. For example, Hubei Huadian Xiangyang Power Generation Co., Ltd., after switching to biomass fuel, earned over RMB 25 million from selling surplus allowances. Such revenues reflect a core efficiency principle: emission reductions are accomplished by those who can achieve them at lowest cost—thus minimizing total societal expenditure for any given emission-reduction target. III. Industrial Growth: Green Equals Growth Where does new growth come from? Capital markets are channeling substantial funds into green industries: 43 environmental-protection companies have gone public, raising over RMB 30 billion in initial public offerings; 666 carbon-neutrality bonds have been issued via exchanges, totaling over RMB 48 billion; and 475 carbon-neutrality-themed mutual funds have been launched, with total fundraising exceeding RMB 40 billion. Within the year, 115 sustainability-linked bonds were issued on exchange markets, amounting to RMB 6.3534 billion—representing year-on-year growth of 167.44% in number and 160.25% in value. These bonds tie coupon rates directly to corporate emission-reduction performance—effectively converting transition outcomes into financing costs. On the real-economy side, industrial parks serve as key platforms: China hosts over 78,000 industrial parks—including 15,000 industrial zones and 233 state-level economic and technological development zones—which contribute over 70% of GDP and over 90% of innovation output. Policies require parks with annual comprehensive energy consumption between 200,000 and 1 million tons of standard coal to lower their carbon intensity to 0.2 tons of CO₂ per ton of standard coal—while the national park average stands at about 2.5. This gap itself represents massive retrofitting demand. Third-party institutions estimate that China’s integrated energy service market will reach RMB 1.3–1.8 trillion by 2035. IV. Cost Accounting: Avoid Shutdown-Style Carbon Reduction

Liu Shijin: Carbon Accounting Costs Cannot Be Ignored

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Speaking at the Caixin Summit, Liu Shijin highlighted that high costs and low accuracy in carbon accounting hinder market effectiveness. He emphasized carbon pricing is vital for driving emission reductions and green industrial transformation.

caixin

2026-11-13

Liu Shijin: Carbon Accounting Costs Cannot Be Ignored

Liu Shijin: Carbon Accounting Costs Cannot Be Ignored

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