Carbon Neutrality Strategies for Chinese International Oil Company Based on the Rapid Development of Global Carbon Market

Abstract

A comprehensive solution for the Chinese international oil company to achieve carbon neutrality, through participation in the global carbon market, is developed. In this work, the overall landscape and operation mechanism of global carbon market is clearly and systematically illustrated by comparing the characteristics of the cap-and-trade system and the carbon tax. The feasibility of developing a global liquidity carbon market is pointed out by finding the connections among compulsory and voluntary carbon markets around the world. Based on the profound understanding of global carbon market, three levels of carbon trading strategies are proposed to help Chinese oil companies reduce emission cost: (1) Develop low carbon projects and trade in one jurisdiction; (2) develop low carbon projects and trade in different jurisdictions; and (3) trade carbon credits or allowance with physical commodities. Three decision-making methods are provided, respectively, for the above three levels of carbon trading strategies by introducing a shadow pricing model for carbon emission rights.