History of Shanghai Environment and Energy Exchange (SEEE)

We discuss the history of the SEEE, which initiated China’s role in climate change mitigation and adaptation services.

The Shanghai Environment and Energy Exchange (SEEE) is a Chinese state-owned company founded in August 2008. It specializes in climate change mitigation and adaptation services including China Carbon Emission Reduction (CCER) trading, carbon financing, energy efficiency, climate technology transfer, and consultancy of low carbon development planning and strategies. SEEE acted as a catalyst for China’s role in the carbon market; its expansion over the last decade helped shape China’s national emissions trading scheme (ETS).

Trading History

Officially approved by the Shanghai Municipal Government in August of 2008, SEEE was the first system of environment and energy exchange in China. A year after its launch in 2009, it began trading certified emission reduction credits. Then from 2011 to 2013, it started trading voluntary emission reduction credits. This rapid growth led to Shanghai launching China’s second pilot ETS, called the Shanghai Emission Allowance, which eventually became the country’s compliance market by 2014. To date, the pilot covers more than half of the city’s emissions, including power, industry, and non-industrial sectors such as construction, aviation, and transport.

Furthermore, in order to create a market balance for the sectors involved, the SEEE then began to trade CCER credits, which took over as the country’s voluntary emission reduction market. According to a market analyst at SEEE, having both the compliance and voluntary market enhances green investment returns with an increase in consumer preference for green products. By allowing flexibility in regulatory implementation and thereby diversifying the auctions, the Shanghai pilot further increased liquidity and promoted price discovery.

In January of 2017, the SEEE and the Shanghai Clearing House jointly launched the Shanghai Emissions Allowance Forward, a hedging tool for carbon market participants to manage market risks. It is a contract between two parties to buy or sell emissions allowances at a specified price on a future date. This is a relevant development as being based in Shanghai gives the SEEE a ‘location advantage’. Due to its close proximity to this major international financial center, it has been able to actively promote green financing investment in green industry funds, green PPP financing, international green capital financing, and green consulting services.

More about SHEAF will be released in the next blog on China’s road to curbing carbon emissions.

Location Advantage

In addition to offering a variety of services, as of December 2017, SEEE also acts as the host organization of the Global Climate Change Technology Exchange of the South Global Assets and Technology Exchange System, which is a joint enterprise between the United Nations and the Chinese government. Its location advantage has also enabled it to take on this international role while promoting carbon capital throughout the nation to allow other provinces to develop pilot ETS of their own before China launches its national ETS, which officially launched at the end of 2017, but has not been implemented until 2021.

National Carbon Market

By 2018, SEEE provided carbon trading services to over 600 member companies and consultancy services to decision makers in both the private and public sectors.

Due to its leading role, Shanghai was chosen to construct, operate and maintain the national ETS. SEEE then became known as the National Carbon Market (NCM) Capacity Building Center. According to a director within the Green Finance Department at China’s Industrial Bank, “China’s ambitious plan to achieve a 65% reduction of carbon intensity per GDP unit by 2030 is largely influenced by the confidence in SEEE to generate and spread adequate funding to projects nationwide.”

The expansion of SEEE within Shanghai and its surrounding provinces has played a pivotal role in the development of the NCM. Its broad capability set across climate change mitigation and adaptation services helped China enter the international carbon market. Financial mechanisms to manage carbon trading and associated risks will be covered in greater detail in AlliedCrowds next blog on the SHEAF.