VINACHEM

China has for a decade been putting together the groundwork for what is likely to be the world's largest array of programs for incentivizing emissions reduction behaviors on the demand or consumer side – collectively called Tanpuhui, which loosely translates to "carbon inclusion."

These Tanpuhui programs, rolled out by both government authorities and private companies, reward activities that save energy and reduce emissions in daily life, such as taking public transport, purchasing digital instead of paper tickers or adopting reusable cutlery.

For populous nations like China, these consumer-facing programs have immense potential for emissions reductions, especially when consumers around the world have been resistant to changing their habits and existing carbon policies largely target only industries and corporates.

More importantly, Tanpuhui programs are expected to be gradually formalized and integrated into China's wider carbon ecosystem that includes national compliance and voluntary carbon markets, carbon footprint database, and carbon peaking and carbon neutrality roadmaps.

Around 26% of China's total energy consumption and one-third of CO2 emissions were directly incurred by the general public during daily activities, Ministry of Ecology and Environment, or MEE, said in its report titled Development and Practices of China's Carbon Inclusion (Tanpuhui) in 2023.

"We need to shape Tanpuhui emission reductions into a new type of carbon asset, which can be gifted, traded, and used as a financial instrument. Tanpuhui needs to become an essential part of China's carbon markets, and a critical approach to meet the country's carbon neutrality target," MEE said.

It said a proper marketplace needs to be created for Tanpuhui emission reductions that can eventually be traded in a way similar to carbon credits.

"Despite the emergence of numerous Tanpuhui platforms, we are yet to establish a comprehensive, systematic, and well-coordinated Tanpuhui program at the national level," MEE said.

However, there is both limited precedent and appetite globally for nationwide consumer-facing emissions reduction programs, and similar initiatives have faced both socio-cultural and economic backlash in some countries.

Although some experts suggest it could succeed within the framework of Chinese governance and policymaking that has seen its clean technology and electric vehicle sectors thrive, Tanpuhui is a still giant experiment with lots of challenges to tackle.

The story of Tanpuhui

The idea of creating consumer-end decarbonization programs was sown in 2013 when China launched pilot carbon markets in several provinces and cities. Former climate envoy Xie Zhenhua had said the country also needed a regime to incentivize individuals to reduce emissions in daily life.

"In future, the general public's emission reductions should also be part of our carbon markets," the climate veteran said in 2013. But until 2021, few such programs had materialized.

The first government-backed program was launched in Wuhan, Hubei in 2016, called Tanbaobao, meaning "a bag of carbon treasures." It rewarded consumers who took public transport with free movie tickets and shopping vouchers.

After that, the heavily industrialized Guangdong province kicked off its program in 2016 named "Tanpuhui," which tried to cover more consumer goods and services. Hebei province also initiated its local program in 2018 and used the same name "Tanpuhui."

The most well-known commercial program was launched in 2016, called Ant Forest, developed by Ant Group, an affiliate of Chinese technology conglomerate Alibaba Group. The program is linked to Alipay, an e-wallet used by the vast majority of people in mainland China. About 690 million Alipay users have participated in this program by purchasing eco-friendly goods and services, according to Ant Group's 2023 sustainability report released on June 13.

Ant Forest rewards consumers by planting trees on their behalf and has donated Yuan 3.47 billion ($478.46 million) to various ecological restoration projects, which translated to 475 million trees planted and over 1,600 species of wild animals and plants protected, Ant Group told S&P Global Commodity Insights.

In October 2021, China committed to build pilot "Tanpuhui" programs across the country as part of its new Nationally Determined Contributions, or NDCs, during COP26. Following that, the year of 2022 became "the start of Tanpuhui era."

Carbon inclusion

In June 2024, 15 Chinese government bodies released a joint action plan to create a national carbon footprint management system that would include carbon footprint accounting standards for around 100 products by 2027 and 200 products by 2030.

This was an unprecedented move in the development of China's carbon ecosystem, partly driven by externalities like cross-border carbon taxes but also a move that would cut across multiple state agencies and product supply chains.

In the action plan, the government called for leveraging Tanpuhui programs to educate consumers to choose eco-friendly goods and services, using the carbon footprint data as a reference. The plan firmly positioned Tanpuhui within China's evolving carbon policy framework as a major tool to create awareness and set the stage for implementing tighter carbon policies if needed.

At the start of 2022, there were fewer than 10 platforms that hosted carbon accounts for individuals, but by the end of the year this numbered over 70, Lu Leshu, standing member of Green Credit Committee, China Banking Association, said in her book on Tanpuhui titled Carbon Account.

"Early attempts by some European countries aimed at creating cap-and-trade systems for individuals similar to the cap-and-trade systems for companies. In contrast, attempts by South Korea and Japan focused on providing rewards for consumers' eco-friendly choices," Lu said in her book.

"Based on the results, Japan and South Korea's programs attracted more participants and covered more emissions. The results also reflected that, unlike companies, individuals may take more action driven by carrots, instead of sticks," she said.   – Platts –