.png)
The anticipated relaunch of China's domestic voluntary carbon mechanism, the China Certified Emission Reduction program (#CCER), is poised to have far-reaching implications for the global voluntary carbon market (#VCM).
What is the state of China’s voluntary carbon market (VCM)?
🤝 Market participants in China have exhibited a strong preference for a government-backed program. China's Ministry of Ecology and Environment (MEE) will collaborate with other ministries and the public but will retain sole responsibility for creating methodologies for future carbon credits in China.
🌳 Regulatory efforts to exclude projects lacking additionality aim to enhance the quality of the CCER. The old system focused mostly on emissions reductions but with some forestry and biomass + energy. Under a re-launched CCER, #afforestation projects, small-scale #renewables, and household devices are likely to be prioritised.
🏠 Project developers, who had previously turned to international certifiers due to stalled domestic registrations, are expected to shift back to the domestic CCER registry. This could be prompted by expectations of higher prices for new CCERs than VCM credits. What are the global implications?
🌏 China has established itself as a major #carbon credit supplier in the global VCM. In Q1 2023, China contributed 20.8% of the total voluntary carbon credit issuances (19 out of 68 million mtCO2e) according to S&P Global.
🏭 Covered entities (for now power generation industries but expected to be expanded) can utilize CCERs to offset 5% of annual #emissions obligations, translating to significant annual CCER demand. This demand accounts for over 50% of the annual global VCM trade volumes in recent years (200 out of over 400 million mtCO2e).
📃The reboot of the CCER is anticipated to signal China's global positioning in carbon markets as well as fulfilling domestic demand. The relaunch is expected to address how CCERs and voluntary carbon market credits could be exported under the #Article6 framework.
Expectations are that CCERs will reopen in the latter half of 2023, with conservative estimates indicating no later than early 2024. The revival of China's domestic voluntary carbon market through the CCER program is poised to reshape the global voluntary carbon credits trading landscape. With government support, increased project developer interest, and potential pricing advantages, the impact on global offsets trade and the voluntary carbon market as a whole is expected to be significant.
What do you think? What might be the implications of a revived China Certified Emission Reduction program?
Comments