Reporter Du Lijuan reports from Beijing.
Entering 2024, the countdown to the resumption of the National Certified Voluntary Emission Reduction (hereinafter referred to as "CCER") plan has also begun, and all parties in the market are also making various preparations for the restart.
On January 8, a market source engaged in carbon trading told China Business News that in December 2023, the regulator had conducted a multi-party argument on the resumption of CCER, and the market also had great confidence in the restart at that time, but the final plan did not come to fruition. "From the current situation, the probability of CCER restarting in the first half of 2024 is relatively high, and we are currently making various preparations for the declaration. The person said.
As a carbon offset mechanism, CCER mainly indicts emitting enterprises to purchase certified amounts that can be used to offset their own carbon emissions from enterprises that implement "carbon offsetting" activities, and its purpose is to provide market-based economic incentives for the application of green and low-carbon technologies in the fields of renewable energy, forestry carbon sinks, methane removal and industrial energy conservation.
According to the Beijing Green Exchange**, if we compare the size of the EU carbon market (1.5 billion tons of allowances, 9.3 billion tons of trading volume, 80 euros per ton, about 750 billion euros in transaction value), after the financialization of China's carbon market in the future, it is expected that the annual trading volume may exceed 10 billion tons,** or exceed 100 yuan, and the transaction volume is expected to exceed 1 trillion yuan.
In order to give full play to the role of the market mechanism and promote the optimization of carbon resource allocation, China opened CCER in 2012, which can not only be used for voluntary trading, but also can be used for a certain proportion of allowance settlement and offset according to the differentiated requirements of the national carbon market and the eight local carbon markets, but the mechanism has been suspended since 2017.
Since then, the market has also paid much attention to the resumption of CCER.
In March 2023, the Ministry of Ecology and Environment (MEE) solicited methodological suggestions for voluntary greenhouse gas emission reduction projects from the whole society, explicitly encouraging methodological suggestions for industries and fields with obvious emission reduction effects, high social expectations, low technical disputes, reliable data quality, and both social and ecological benefits, and allowing them to exempt or simplify their additionality.
In October of that year, the Ministry of Ecology and Environment successively issued the Administrative Measures for Voluntary Greenhouse Gas Emission Reduction Trading (Trial), the Notice on the Arrangement of Relevant Work Matters in the National Greenhouse Gas Voluntary Emission Reduction Trading Market, and the first batch of four methodologies, and made provisions on project validation and registration, emission reduction verification and registration, emission reduction trading, and management of verification and verification institutions.
According to the above-mentioned documents, CCER's emission reduction projects that have been filed before the suspension will need to reapply for project registration, which means that emission reductions issued before 2017 will no longer be used to offset the payment of carbon emission allowances in the national carbon emission trading market from 2025.
In this regard, PwC China's Regional Economic and Financial Business Leader Zhang Lijun said that the first batch of four methodologies announced were exempted or partially exempted from additionality demonstration, and on the whole, the emission reduction calculation method and the corresponding default value are clearer, but from the actual situation, the types of projects that meet the requirements of these four methodologies are still relatively limited, and it is expected that the supply of CCER will be relatively tight in the future.
Despite this, the market still gives a relatively optimistic expectation for this.
Fitch pointed out in its latest research report that China's ETS currently covers more than 2,000 companies in the power sector, and these companies' CCERs can be used to offset 5% of their certified carbon emissions. Other "hard-to-abate" sectors, such as steel, cement and petrochemicals, will be included in the mechanism once the relevant effective market infrastructure is in place. This will increase the cost of compliance and the demand for CCER in the sectors covered by the national ETS.
Fitch** will not be too concerned about companies that are not included in the system in the future, as they will be able to use their CCERs to offset a fraction of their carbon allowances to contribute to achieving their net-zero targets.
It is reported that in July 2023, the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration jointly issued the "Notice on Promoting Renewable Energy Electricity Consumption with Full Coverage of Renewable Energy Green Power Certificates", which proposes to study and promote the convergence and coordination of green certificates and the national carbon emission trading mechanism and voluntary carbon emission reduction trading, which will help the deep integration of the two types of markets.
Fitch expects the CCER programme to continue to expand in terms of market participants, which will increase the demand for carbon offsets and drive investment in carbon reduction solutions.
Editor: Meng Qingwei Proofreader: Zhai Jun).