China is preparing to relaunch voluntary carbon credits, after shelving the scheme six years ago.
The China Certified Emission Reductions (CCER) scheme allows quantification and sale of CO2 reductions by projects that include forestry, renewable energy, and methane utilisation. Each credit corresponds to a tonne of CO2 reduction.
The credits are an important part of China’s national compliance carbon market and its pricing, because under current rules CCERs can cover up to 5% of an emitter’s compliance obligations. Demand for CCER credits could reach 350–400 million tonnes per year as a result.
The CCER scheme was started in 2012 and 1,047 projects were registered between 2013 and 2017, with wind power, photovoltaics and rural biogas utilisation accounting for more than 73%. Of these, 287 projects were issued with credits.
In March 2017, it was announced that new projects could no longer register, due to the small volume of credit transactions and a lack of standards in carbon audits. Existing credits are still available to trade, though most information on the CCER trading platform has not been updated since 2021.
Currently, China’s compliance carbon market includes only the power industry. If it expands as planned to include eight other heavily emitting industries – petrochemicals, chemicals, building materials, steel, nonferrous metals, paper, electric power, and aviation – then it will cover 7–8 billion tonnes of emissions per year.
At a conservative estimate, the CCER spot market will reach about 20 billion yuan (US$2.8 billion) by 2025, according to a research report by Minsheng Securities.
The government has been preparing to restart CCER for some time. In February this year, the Beijing Green Exchange announced that a “unified” CCER system “has been developed”. In March, the environment ministry publicly solicited methodological suggestions for voluntary emission reduction projects.
However, restarting CCER still faces obstacles, such as the need for multi-departmental coordination and technical standards. Two issues in particular need resolving before the restart, says Chen Guoqiang, senior partner of Capital Equity Legal Group.
One is whether renewable generation projects should be included in the scheme. To be awarded carbon credits, projects need to demonstrate that their emissions reductions are “additional”, meaning if the scheme did not exist nor would they. The other is how to ensure the accuracy of disclosed data.
Read China Dialogue‘s recent analysis on rebooting CCER.