Chinese official urges government bodies to coordinate, safeguard carbon market integrity

Chinese government bodies should improve coordination to address concerns that some renewable projects are eligible for both domestic carbon credits and renewable energy certificates, Zhang Xin, chief economist at the National Center for Climate Change Strategy and International Cooperation, or NCSC, said late June 4.

In an article published in China Environment News, the mouthpiece of the Ministry of Ecology and Environment, Zhang said that allowing one project to obtain two environmental certificates enables a project developer to make double claims for economic incentives. This conflict between different government bodies, if not resolved in a timely manner, could trigger concerns over the integrity of the China Certified Emission Reduction market, China's voluntary carbon market, he said.

NCSC is a government organization under MEE, in charge of carbon market development and international climate negotiations, such as negotiations at the UN Climate Change Conferences.

Solar thermal and some offshore wind project developers are currently allowed to receive carbon credits from the CCER market. They can also get renewable energy certificates from the domestic Green Electricity Certificate market.

Concerns have previously been raised by GEC and CCER market participants as well as international organizations. However, it is the first time a Chinese government official has explicitly highlighted the issue and called for government bodies to coordinate and resolve it.

In China, publishing articles on state media is a common way for politicians to publicize their views, lobbying or influencing other government or industrial organizations to take action. Notably, MEE currently manages the CCER market, while the GEC market is managed by the National Energy Administration.

Safeguarding CCER's integrity

Zhang said ensuring the integrity of the CCER market is crucial for China to participate in global carbon pricing, which has become increasingly sophisticated and ever-evolving. At COP28, for instance, some EU officials suggested China's carbon policies still contained some loopholes.

Meanwhile, CCER, as a voluntary carbon market, needs to align with the VCM integrity standards that are applied globally, Zhang said. To be certified as CCERs, emission reductions must be "additional", which means the reductions can only be achieved with the incentive provided by the carbon market, he said.

Resolving this is also crucial for CCERs to meet the requirements under the Carbon Offsetting and Reduction Scheme for International Aviation, a global emissions regulation regime under the International Civil Aviation Organization.

Zhang said promoting CCERs to get the ICAO's recognition is crucial for enabling Chinese airlines to use CCERs to offset their CORSIA-liable emissions.

Connecting CCER, GEC markets

This double-claim issue has also triggered some integrity concerns in the international, mainstream renewable energy certificate markets, Zhang said.

For instance, RE100, an industry group of more than 400 companies pushing for 100% renewable electricity by 2050, has asked its members who want to use GECs to submit additional proof that the projects behind the GECs will not apply to CCER issuances, Zhang pointed out.

Zhang also called for the NEA to enhance its own GEC system. For any renewable project that participates in the CCER market, the project should be frozen and then cancelled from the NEA's GEC platform.

He added that in future, the carbon market, the GEC market and the power market need to connect their databases and enable transparent information sharing, in order to ensure that all environmental markets in China operate in a serious and fair manner.

Platts, part of S&P Global Commodity Insights, assessed CORSIA-eligible carbon credits at $11.75/mtCO2e on June 4. It assessed the CCER price at Yuan 96/mtCO2e ($13.25/mtCO2e) on June 4, according to data from Beijing Green Exchange.