Future of China’s Green Electricity Certificate (GEC)

[The following is a commentary by Chnergy Institution]

With the acceleration of the global green energy transition, Renewable Energy Certificates (RECs) have become a core tool for countries to promote the development of renewable energy and promote carbon emission reduction. In China, the Green Electricity Certificate (GEC or green certificate) is the only certificate for the environmental attributes of domestic renewable energy. However, although this rule guarantees order in the domestic market in China, the GEC faces many challenges in the international market. Chinese GECs have not yet been widely recognised by the international market, which hinders the participation of Chinese companies in global green energy transactions.

The domestic uniqueness of China’s GEC: Protecting or shackling the market?

To avoid duplication, power generation entities cannot apply for both GEC and international REC certification. This has led to a situation where although the GEC is the only proof of environmental attributes in China, but it has yet to receive widespread recognition in the international market.

This policy also prevents the international circulation of China’s GEC, making it difficult for Chinese companies to participate in international certification and trading with the same amount of electricity in the international market. The demand for green power in the international market is growing, and a company’s global green brand building and carbon emission reduction commitments also need to be realised through international certification platforms. The current regulatory framework of China’s GEC has undoubtedly become a major obstacle for enterprises to expand in the international market.

The current restrictions on China’s GECs reflect the deep gap between China and the international green power certification system. It is impossible for international RECs to enter the Chinese market, and it is also challenging for Chinese green certificates to go international. On the one hand, there is the absence of an international market. Many international markets have clear certification requirements for green power, and companies must obtain international/regional RECs if they want to participate in cross-border power trading, carbon trading, or fulfill international carbon emission reduction commitments. However, China’s green certificates are not accepted in the international market, resulting in serious restrictions on the ability of Chinese companies to participate in international transactions.

In addition, green electricity produced by Chinese companies domestically cannot be recognised and circulated globally through international certification. GECs are disconnected from international/regional RECs markets make it challenging to establish effective connections with other REC systems around the world.

Challenges and opportunities to participate in international/regional REC markets

Although international recognition of China’s GECs is yet reached the desired level, there are ways for Chinese companies to participate in the international green energy market. These solutions are shared below.

Developing a dual-track certification mechanism for GECs and international RECs

Chinese enterprises can apply for GECs in the domestic market and international REC certification for electricity in the international market by distinguishing the use of different electricity uses. This means that enterprises can choose different certification systems at home and abroad according to factors such as the location of the project and the destination of energy exports. This dual-track certification mechanism can help companies comply with overseas requirements while avoiding violating the uniqueness of domestic GECs.

Promoting the internationalisation of China’s Green Electricity Certificate (GEC)

China should actively promote the mutual recognition of the GEC system with the international market. Through cooperation with international REC certification bodies, China’s green certificates have the potential to gradually gain international recognition, thereby guaranteeing the competitiveness of enterprises in the global green power market. For example, we can learn from the Guarantees of Origin (GO) system in Europe or the Renewable Energy Certificate (REC) system in the United States to align with international market standards and open up the path for China’s green certificates to go global.

Strengthening regional cooperation to promote international certification

The Belt and Road Initiative (BRI) provides an important opportunity for China’s green certificates to enter the international market. Through energy cooperation with countries along the Belt and Road, China can explore the establishment of a regional green power certification mechanism and promote mutual recognition of certification between regions through cooperation. This will not only help promote the internationalisation of China’s green certificates, but also provide more opportunities for domestic enterprises to participate in the international green energy market.

Using blockchain and other technologies to enhance international recognition

At present, blockchain technology is becoming more and more widely used in global green power certification. Through the introduction of blockchain technology, China can enhance the transparency and credibility of China’s green certificates, and enhance their recognition in the international market. By establishing an open, transparent and tamper-proof green certificate management system, China can provide more credible green power certification standards for the international market, and then gain the trust and recognition of the international market.

The international future of China’s Green Electricity Certificate (GEC)

The Rules for the Issuance and Trading of Green Electricity Certificates (GECs) for Renewable Energy provide a strong guarantee for the standardised development of China’s domestic green power market, but produces limitations on internationalisation. If Chinese companies want to occupy a place in the global green power market, they must break through the closed situation of domestic green certificates and find effective ways to connect with the international/regional REC systems.

Promoting the internationalisation of China’s green certificates is not only an inevitable choice for market demand, but also an inevitable trend for global green energy cooperation. In this process, China needs to participate more actively in the formulation of international energy rules, promote mutual recognition and cooperation of GECs, and provide strong support for the green competitiveness of Chinese enterprises in the global market.

As China takes steps to internationalise the GEC, it is essential for businesses to work with reliable and committed partners such as REDEX to navigate the complex renewable energy ecosystem in China.

Contact us at enquiry@redex.eco to learn more.