To further standardize the national voluntary greenhouse gas emissions trading, in order to promote the achievement of carbon peaking and carbon neutrality goals, the Ministry of Ecology and Environment, in conjunction with the State Administration for Market Regulation, has revised the original “Interim Measures for the Administration of Voluntary Greenhouse Gas Emissions Trading” and formulated the new “Measures for the Administration of Voluntary Greenhouse Gas Emissions Trading (Trial).” This step has been taken to ensure the compliance and effectiveness of emissions trading and related activities.
After a three-month period of soliciting opinions, the new “Regulations” were officially published and implemented on October 19, 2023. On October 24, the Ministry of Ecology and Environment, in accordance with these “Regulations,” issued a “Notice on the Arrangements for Work Related to the National Greenhouse Gas Voluntary Emissions Trading Market,” which further elaborated and clarified some specific provisions of the “Regulations.” This series of measures aims to better manage and promote greenhouse gas emissions trading and provide solid legal support for achieving China’s carbon reduction goals. Next, we will also focus our attention on key areas for interpretation.
- Clarified that a national unified trading market and registration agency will be established.
The Emission Reduction Trading Regulations reaffirm the responsibilities of the Ministry of Ecology and Environment, which include establishing a national unified registration agency for voluntary greenhouse gas emissions reduction and a national voluntary greenhouse gas emissions reduction trading organization. Additionally, the Ministry is responsible for organizing the development of the necessary registration and trading systems for these two organizations. In August of this year, the website of the National Verification Voluntary Emission Reduction Trading Platform (https://ccer.bjets.com.cn) was updated to provide information on CCER account opening, registration, and the transfer of old accounts. Furthermore, the registration system’s website (http://registry.ccersc.org.cn/login.do) is now open to the public. However, the specific operational rules for both systems and the entities responsible for their operation have not been officially announced. The Beijing Green Exchange currently handles matters related to account registration on an interim basis.
The establishment of two organizations and two sets of systems implies that there will be distinctions in the management and processes of emissions registration and trading. The verification and emissions reduction generation processes will be overseen by the registration agency, while the trading organization will assume responsibilities similar to those of a securities exchange.
Furthermore, this revision of the Emission Reduction Trading Regulations, in Article 7, paragraph 3, has introduced a provision stating that “trading organizations shall take effective measures in accordance with relevant national regulations to maintain the healthy development of the market, prevent excessive speculation, and guard against financial risks.” This provision aims to recognize the potential financial aspects of greenhouse gas emissions reduction projects and convey regulatory requirements to entities seeking to participate in greenhouse gas emissions trading. Given the current regulatory stance in the securities and financial markets, market participants should exercise caution regarding regulatory requirements and enhance their compliance awareness.
- Strengthen self-regulation and post-regulation.
The Emission Reduction Trading Regulations emphasize a more market-oriented self-regulation and clearly outline the principle of government agencies primarily conducting post-regulation. According to Article 13, verification and validation organizations must provide clear affirmative or negative conclusions in their verification reports. Furthermore, as stated in Article 30, these organizations are required to comply with relevant provisions in the “Regulations on Certification and Accreditation of the People’s Republic of China” and the “Measures for the Administration of Certification Bodies” in order to be included in the supervision system of the State Administration for Market Regulation.
Additionally, in accordance with Article 18 of the Emission Reduction Trading Regulations, project owners are not allowed to entrust the same verification and validation organization for emissions registration and emissions verification for the same emissions reduction project. This is done to prevent situations of self-review by verification and validation organizations, indirectly enhancing industry self-regulation and reducing moral risks associated with these organizations.
This emphasis on market-oriented trading is in line with the requirements of “streamlining administration, delegating powers, and improving regulation and services,” which delegate the responsibilities of project emissions reduction and emissions verification to market-based organizations to strengthen post-regulation and promote the overall development of the market.
- Market-oriented Regulation
The sixth chapter of the Emission Reduction Trading Management Measures emphasizes a more market-oriented approach to supervision and management. It removes specific regulatory details and instead focuses on “supervision and inspection of authenticity and legality.” Furthermore, the management measures stipulate that ecological and environmental authorities at or above the provincial level can utilize methods such as government procurement of services to commission legally established technical service organizations to provide technical support for supervision and inspection. This paves the way for the government to hire professionals through the market in the future to address technical issues related to greenhouse gas emission reduction projects and assist in regulatory efforts. This initiative aims to strengthen market-based oversight of emission reduction trading and ensure the authenticity and legality of projects.
- Voluntary Emission Reduction Transition
The “Regulations” stipulate that voluntary emissions trading must be conducted through the trading system, allowing for various trading methods such as negotiated agreements, bulk agreements, one-way bidding, and other methods in accordance with regulations, continuing the provisions of the “Interim Measures.” To ensure that trading entities can promptly update the information related to the quantity and status of their verified voluntary emissions reductions, the Beijing Green Exchange will provide corresponding support through the registration system.
Furthermore, the “Regulations” also provide brief guidelines for the use of verified voluntary emissions reductions: These reductions can be used in accordance with national regulations for offsetting carbon emission quotas in the national carbon emissions trading market and local carbon emissions trading markets, carbon neutrality in large-scale events, and offsetting greenhouse gas emissions by enterprises, among other purposes. In such cases, verified voluntary emissions reductions should be canceled in the registration system. Additionally, all participating entities have the right to voluntarily cancel their holdings of verified voluntary emissions reductions for charitable purposes.
- Expecting linkage with international markets
Article 29 of the Emission Reduction Trading Regulations continues to retain the relevant views on cross-border trading as outlined in the original draft for public opinion. In the potential large-scale greenhouse gas emissions reduction market, foreign institutions with mature market systems (such as GS/VCS) have high expectations for the future emissions market. At the same time, the EU’s Carbon Border Adjustment Mechanism (CBAM) began trial operations at the beginning of this month and is set to be officially implemented in 2026 after approximately one year of transition. The activation of CBAM has, to a certain extent, forced other countries to change their policies, intensifying the competition among major economies for dominance in carbon pricing.
Therefore, we need to establish a comprehensive and stable carbon pricing mechanism as soon as possible.As a crucial component of the global climate governance system, China urgently needs to restart greenhouse gas emissions-related markets to meet the demands of future challenges. China Europe Carbon Neutral Technology (CNEUCN) by the activities of its Scientific Committee (ScC) and the Experts’ Advisory Board (EAB) can contribute to the implementation of voluntary greenhouse gases (GHGs) emission trading in China. CNEUCN’s mission and core activities are fully aligned with the goals of implementing voluntary GHGs emissions trading, as they offer knowledge, support, and expertise across various aspects of emissions reduction and trading.
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