China looks set to relaunch its new China Certified Emission Reduction (CCER) platform
The country started issuing CCERs in 2012 before suddenly halting them in 2017, but recent signs point to a resumption of the scheme this year.
CCERs are China’s version of the Kyoto Protocol’s Certified Emission Reduction or CER – a carbon credit that can be traded under the protocol’s Clean Development Mechanism.
A typical carbon market is made up of trading in both carbon allowances and carbon credits. Allowances, also known as quotas, limit the emissions a company can make: what the company does not use of these allowances, it can sell.
Credits are earned by a broader range of economic actors for reducing emissions. Activities to reduce emissions can be profitable because credits can be sold on carbon markets.
In 2013 China launched seven regional carbon market trials, and as CCERs could be offset against carbon allowances or traded on the market, corporate groups with renewable energy interests set up carbon asset firms.
Despite 80 million tonnes worth of CCERs issued between 2012 and 2017, only 32 million tonnes were sold, keeping prices low, forcing industries to lose interest, and oversupply pushing prices ever lower.
Since the scheme was halted in 2017, existing registered projects continued to be traded, but at extremely low volumes. The relaunch of the scheme could greatly benefit climate mitigation projects, such as forestry and energy efficiency enhancements. However, project quality remains a key challenge, and this could hamper China’s climate efforts, experts said.
And China is the biggest carbon credit supplier in the global VCM. In the first quarter of 2023, it accounted for 20.8% of total voluntary carbon credit issuances of 68 million mtCO 2e, according to Abhijeet Thakkar, carbon analyst with S&P Global Commodity Insights. The data is based on four main international standard setting bodies -- Verra, Gold Standard, American Carbon Registry and Climate Action Reserve.
However, this trend could reverse, and market participants also expect new CCERs to be priced significantly higher than VCM credits, driving project developers to the domestic registry.
And the potential market is huge. Demand for CCERs from the compliance market alone is significant. Currently, compliance entities can use CCERs to offset 5% of their annual emissions obligations that total more than 4 billion mtCO2e. This translates into over 200 million mtCO2e of annual CCER demand, equivalent to at least 50% of annual global VCM trade volumes in past years.
The national market presents new challenges for the CCER scheme, but everyone is keen to see it return. Let’s hope it comes back with a bang!
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