In August 2024, China’s National Energy Administration (NEA) and Ministry of Ecology and Environment (MEE) jointly issued a Notice on creating a linkage between the Green Electricity Certificate (GEC) Market and the China Certified Emission Reduction (CCER) market. This article answers several FAQs about the Notice and provides additional information.
What is the background and significance of the Notice?
China plans to promote the use of green electricity and international mutual recognition of the Green Electricity Certificate (GEC).
To this end, policymakers have instituted several changes to the verification of renewable energy. These include:
- In July 2023, it was clarified that the GEC is the only certificate for determining the production and consumption of renewable electricity; the I-REC(E) would no longer be recognised for renewable energy generated after 31 December 2024.
- In January 2024, the Chinese government promoted the inclusion of GEC trading and this will be included in the accounting of energy-saving evaluation and assessment indicators.
- In July 2024, a new target for the proportion of green electricity consumption in the electrolytic aluminum industry was established, and the proportion of green electricity consumption will be calculated with GECs.
Since the rolling out of the relevant policies, the scale of GEC trading has steadily increased, promoting the continuous increase in the proportion of renewable energy consumption.
The national voluntary greenhouse gas emission reduction trading market is a major institutional arrangement to actively respond to climate change, and promote the green and low-carbon transformation of the economy and society. It is a framework to enhance China’s global carbon pricing voice and serve the international performance of enterprises. As an internationally accepted market-based carbon emission reduction tool, the China Certified Emissions Reduction (CCER) scheme in the voluntary emission reduction market can be used for quota settlement and offsetting in the carbon emission trading market, green supply chain management, social responsibility fulfillment, and carbon neutrality of large-scale activities, enterprises and products.
In October 2023, the Ministry of Ecology and Environment (MEE) and the State Administration for Market Regulation (SAMR) jointly issued the Administrative Measures for Voluntary Greenhouse Gas Emission Reduction Trading (Trial), which established the overall thinking, workflow and rights and responsibilities of market participants in the voluntary emission reduction trading market. The Measures also included project methodologies for deep-sea offshore wind power and solar thermal power generation to support the development of renewable energy.
Green Electricity Certificates and national voluntary greenhouse gas emission reduction trading are both important market-oriented mechanisms to promote sustainable development. The government recognises that the policy coordination of market-oriented mechanisms such as green electricity, Green Electricity Certificates, and carbon trading requires strengthening. The Notice aims to spell out the specific requirements for linking the GEC and CCER markets by clarifying the boundary between the GEC market and the CCER market, and to avoid the duplication of benefits from GECs and CCER credits for deep-sea offshore wind power and CSP projects.
The issuance and implementation of the Notice will help strengthen the effective connection and policy coordination between GEC and CCER markets, and continuously improve the market-oriented allocation system of resources and environmental factors. It will help to accelerate the international recognition of China’s GECs, meet the urgent demands of enterprises, promote the improvement of the green electricity consumption system based on GECs, and will help to improve the voluntary greenhouse gas emission reduction trading system.
What are the main considerations for establishing a two-year transition period in the Notice?
Although both the GEC and CCER trading markets promote power generation in the field of renewable energy and the reduction of greenhouse gas emissions, they have different functions and purposes.
The GEC system aims to provide incentives and subsidies to all renewable energy power generation projects and adjust the energy mix. In accordance with internationally accepted “additionality” requirements, the CCER market focuses on areas and projects that can achieve additional emission reduction effects, and encourages the development of clear emission reduction mechanisms, urgent economic incentives, social, and ecological benefits.
As the international community attaches increasing importance to the green and low-carbon level of supply chains, enterprises need to achieve renewable energy and carbon emission goals through the GEC system and CCER mechanisms. Due to the possibility of duplicate benefits for renewable energy projects in the GEC and CCER mechanisms, it is necessary to clarify the relevant regulations at the policy level to help achieve our carbon reduction goals.
Based on this consideration, the Notice clarifies that the owners of renewable energy power generation projects can independently choose to issue and trade GECs or apply for CCER, and sets a two-year transition period, which will be calculated from 1 October 2024.
During the transition period, renewable energy projects that meet the methodological requirements of deep-sea offshore wind power and solar thermal power generation projects that voluntarily reduce greenhouse gas emissions can independently choose to issue GECs or apply for CCER, and photovoltaic and other wind power projects will not be newly included in the voluntary emission reduction market for the time being, except for deep-sea offshore wind power and solar thermal power generation projects.
After the transition period, the connection between GEC and the CCER markets will be further studied and clarified. It should be noted that renewable energy power generation projects that have completed CCER filing before March 2017 shall be implemented in accordance with the relevant requirements of the Notice.
What are the specific provisions of the Notice to avoid renewable energy power generation projects from duplicating benefits from Green Electricity Certificate trading and CCER applications?
The Qualification Centre of the NEA will issue corresponding GECs on a monthly basis based on the settlement information of deep-sea offshore wind power and solar thermal power generation projects provided by power grid enterprises and power trading centres.
In order to avoid the duplication of benefits for projects, the Notice clarifies that project owners of deep-sea offshore wind power and solar thermal power projects may voluntarily choose to participate in GEC trading or apply for CCER, including:
- For projects that intend to choose to participate in GEC trading, the corresponding renewable energy power generation will no longer apply for CCER by means of enterprise commitment; the Qualification Centre of the National Energy Administration will publicise it in the national GEC issuance and trading system
- For those who intend to apply for the registration of emission reductions of CCER projects, the corresponding renewable energy power generation will no longer participate in the GEC trading by means of enterprise commitment; the CCER registration agency shall publicise it in the CCER registration system.
After the completion of the verification and registration of CCER credits for renewable energy power generation projects, the CCER registration agency will push the information such as the crediting period of the project registration to the Qualification Centre of the National Energy Administration. Subsequently, the Qualification Centre of the National Energy Administration will freeze and disallow the trading of the corresponding amount of untraded GECs during the crediting period in the National Green Certificate Issuance and Trading System.
For the GECs that have been traded before the verification and registration of voluntary emission reduction projects, the Qualification Centre of the National Energy Administration will push the information of the traded GECs during the inclusion period to the CCER registration agency, and the emission reduction will be reduced by the same amount of electricity during the verification and registration of emission reductions.
After the verification and registration of emission reductions is completed, the CCER registration agency will push the information such as the crediting period and CCER registration amount of emission reduction registration to the Qualification Centre of the National Energy Administration. The Qualification Centre of the National Energy Administration will verify the untraded GECs corresponding to the CCER registration amount during the project inclusion period in the National Green Certificate Issuance and Trading System, and disclose the verification information publicly. If CCER credits fail to pass the verification and registration of emission reductions, the GEC of the corresponding renewable energy power generation will be unfrozen and can participate in GEC transactions.
What are the specific arrangements for the establishment of an information sharing mechanism and the strengthening of transaction supervision in the Notice?
The Notice stipulates specific operational methods to avoid renewable energy power generation projects from duplicating benefits from GECs and CCER. To ensure implementation, relevant measures such as establishing an information sharing mechanism and strengthening transaction supervision are clarified at the same time.
The first is to establish an information sharing mechanism, and the National Energy Administration and the Ministry of Ecology and Environment will arrange for the Qualification Centre of the National Energy Administration and the CCER registration agency to exchange information on the freezing, verification and trading of green certificates for deep-sea offshore wind power and CSP power generation projects in a timely manner through the national GEC issuance and trading system and the CCER registration system, as well as the registration of voluntary emission reduction projects and emission reductions.
Secondly, to strengthen the authenticity and credibility of source data, the National Energy Administration and the Ministry of Ecology and Environment has provided guidelines for the National Energy Administration Qualification Centre and CCER registration institutions to use new technologies such as big data and blockchain to strengthen the development of the national GEC issuance and trading system and CCER registration system.
Thirdly, to strengthen data verification, the National Energy Administration Qualification Centre, CCER registration agencies and other units should organise the establishment of a GEC issuance transaction and CCER registration data inspection mechanism, regularly verify and inspect the data, and prevent renewable energy power generation projects from repeatedly benefiting from GEC and CCER.
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