China opens consultation for updating voluntary carbon market methodologies

China's environment ministry on March 30 launched public consultations, seeking revisions on existing methodologies and the introduction of new ones to generate voluntary carbon credits under the nation's China Certified Emission Reduction scheme, it said in a notice on its website.

The move is notable, as the registration of new projects under the CCER scheme has been paused for five years and the credits circulating today are from projects registered before 2017. The demand for CCERs has outpaced supply and the consultation process signals a relaunch of the scheme in the foreseeable future.

The consultation document said the previous methodology framework was not sufficient for China to achieve its targets of carbon peaking by 2030 and carbon neutrality by 2060. S&P Global Commodity Insights has projected China's CO2 emissions to increase by 4% from 2022 and reach 11.13 billion mtCO2e in 2023, making it the world's largest emitter, accounting for 32% of global emissions.

The consultation, which will close on April 30, is open to all types of qualified companies and organizations, such as project developers, industrial associations, and academic and research institutes, the government said.

The relaunch is expected to ease the supply shortage and high prices of CCERs. According to Singapore-based digital exchange MetaVerse Green Exchange, CCERs were priced at around Yuan 60.67-80.52/mtCO2e ($8.85-$11.75/mtCO2e) for the trading week ended March 24. In contrast, the weighted average price of allowances on China's national compliance market was Yuan 56.00/mtCO2e ($8.17/mtCO2e) on March 24, official exchange data showed.

Existing and new methodologies

The environment ministry said, for existing methodologies, the baseline settings need to be updated, and additionality needs to be justified. Additionality is a criterion, requiring proof that emissions cuts would not have taken place without the project.

Some of the current methodologies either did not have the potential for broader applications or were not linked with the national climate policy framework, according to the consultation document.

Notably, a large volume of the current CCER supply is from renewable power projects that have been under scrutiny globally for being credible sources of carbon offsets, as many solar and wind projects are profitable even without generating revenue from carbon trading. It is uncertain whether they will continue to be eligible for generating CCERs after the relaunch.

Meanwhile, domestic renewable energy certificates, known as Green Electricity Certificates, will also be issued to renewable projects. Policy guidance is expected in the future to avoid double counting of the emission mitigation outcomes in different environmental commodity markets.

The environment ministry added that although some new decarbonization technologies have emerged in recent years, they still lack detailed methodologies for generating carbon credits.

The consultation document said that new methodologies to be proposed should be clear, feasible and verifiable and have significant decarbonization outcomes. They should also have social acceptance and be backed by strong data to avoid controversies.

New methodologies should not be proposed for sectors that are already required to decarbonize under the current legislative framework, as CCERs are voluntary by nature, the ministry said. It did not disclose a timeline for approving the list of new methodologies.