On September 15, Huang Runqiu, Minister of the Ministry of Ecology and Environment, presided over a ministry meeting to review and adopt in principle the "Management Measures for Voluntary Greenhouse Gas Emission Reduction Trading (Trial)" (hereinafter referred to as the "Management Measures"). The meeting pointed out that the construction of a national voluntary greenhouse gas emission reduction trading market is a major institutional innovation that uses market mechanisms to reduce carbon emissions and increase sinks, and mobilizes the whole society to jointly participate in greenhouse gas emission reduction actions. It is an important measure to steadily promote carbon peak and carbon neutrality. Not long ago, President Xi Jinping also emphasized at the 2023 Service Trade Conference to build a national voluntary greenhouse gas emission reduction (CCER) trading market to support the service industry to play a greater role in green development.
The registration and approval of CCER projects was suspended in 2017. In recent years, market calls for its resumption have become increasingly louder. With the passage of the "Administrative Measures", official signals have been sent. After six years of deliberation, the restart of CCER will inject great vitality into the carbon trading market. The following will discuss the origin, development process and current situation of CCER.
1. The meaning and origin of CCER
What is CCER?
CCER (China Certified Emission Reduction), which is China Certified Voluntary Emission Reduction, refers to “quantitative verification of the greenhouse gas emission reduction effects of renewable energy, forestry carbon sequestration, methane utilization and other projects in my country, and certifying it in the national Greenhouse gas emission reductions registered in the greenhouse gas voluntary emission reduction trading registration system1".
CCER projects refer to projects that can produce CCER emission reductions, such as our common wind power, photovoltaic power generation, forestry carbon sinks and other projects. In fact, we can also understand CCER as an additional reward given by the state to "projects with greenhouse gas emission reduction effects." When the project party completes the project, the CCER obtained can be traded in the carbon market and earn profits after verification.
The whole process of CCER from development to benefit
CCER's process from development to trading profit includes:
(1) Quantification: After the project applicant develops the CCER project, it calculates "the project has reduced emissions by X tons of CO2" in accordance with relevant requirements;
(2) Verification, a third-party verification and verification agency will "verify, issue a report, and publicize" these X tons of CO2 in accordance with relevant national regulations;
(3) Registration transaction. After the project declarer "publicizes and registers these X tons of emission reductions" in the registration system, it can trade in the carbon market 2.
CCER originates from the Clean Development Mechanism (CDM)
The development of CCER can be traced back to 1997. The Kyoto Protocol 3 signed in this year was a milestone in the global response to climate change and sustainable development. It pioneered a series of innovative and innovative measures aimed at reducing greenhouse gas mitigation costs. CDM is one of the three flexible carbon trading mechanisms designed by the Kyoto Protocol.
Since greenhouse gas emission reductions achieved anywhere on the earth have the same effect on global climate change, in order to achieve the maximum greenhouse gas emission reduction at the minimum cost, greenhouse gas emission reduction activities are arranged at the cost of emission reduction. The lowest places (mainly developing countries), this is actually the connotation of CDM.
Therefore, the essence of CDM is: developed countries invest in low-cost emission reduction projects in developing countries and obtain emission reduction credits (CERs) from them to fulfill their emission reduction obligations under the Kyoto Protocol. At the same time, CDM projects can also promote the economic, social, environmental and sustainable development goals of developing countries.
Differences and latest requirements between CCER and CDM
The basic principles and operation mode of CCER are derived from CDM, so it can also be said that CCER is China's CDM. However, the scope of CCER projects is limited to China, and it can currently only be traded in the Chinese carbon market. In addition, there are some differences between CCER and CDM in terms of development time, qualification restrictions, project methodology and development costs.
2. Thoughts on the development history and current situation of CCER
Since there is CDM, why does my country need to develop CCER?
Before the launch of CCER, my country mainly participated in international CDM projects. For example, the Beijing Anding Landfill was the first CDM project approved by the Chinese government, and the Inner Mongolia Huitengxile Wind Farm Project was the first CDM registered project in my country.
Changes in the number of annual CDM registrations in China from 2005 to 2012
In 2005, there were only 3 CDM projects registered in my country. After 2006, there was explosive growth. By 2012, the annual number of CDM project registrations had reached 1,819. After 2013, the number of projects issued by CDM in my country dropped sharply, and my country's CDM market declined rapidly. There are two reasons for this. First, the number of internationally issued CERs (emission reduction credits obtained through CDM projects) exceeds demand, and the EU carbon market is sluggish due to factors such as the sluggish real economy. The demand for CERs has declined, and the international carbon price has fallen rapidly; the second is that The second phase of the Kyoto Protocol ended at the end of 2012, and the EU carbon trading market no longer accepts CERs from China, India and other countries.
The first stage of CCER development in my country and the reasons for “suspension of acceptance”
With the development of CDM limited, my country has begun to establish a carbon trading market system + voluntary certified emission reduction mechanism (CCER). The figure below shows the process of developing CCER in my country.
The process of developing CCER in my country
2012-2017 is the first stage of CCER development in my country. However, because it is in the exploratory period of construction, there are problems in this stage such as immature carbon market, non-standard CCER projects, low willingness to participate in CCER, and oversupply. In March 2017, the National Development and Reform Commission stated that due to "problems such as the small volume of greenhouse gas voluntary emission reduction transactions and the insufficient standardization of individual projects", it issued an announcement to "suspend applications" for accepting CCERs. However, CCERs that have been approved and registered can still be traded, and the Carbon Emissions Trading Management Measures (Interim) stipulates that the upper limit of CCER offsets that can be used when paying off carbon quotas is 5% (for example, if an enterprise generates 100 tons of carbon emissions, only 94 tons of carbon quotas are allocated, the company needs to purchase an additional 6 tons of carbon quotas to fulfill the contract. The 5% upper limit limits the company to purchase up to 5 tons of CCER for offset, and it needs to be purchased from the carbon market 1 ton of carbon allowance is used for compliance).
CCER is about to restart, the market gap is huge, and CCER projects will usher in a registration boom
In July this year, the Ministry of Ecology and Environment issued the "Measures for the Management of Voluntary Greenhouse Gas Emission Reduction Trading (Trial)" and publicly solicited opinions from the public; in August, the national voluntary greenhouse gas emission reduction trading system opened an account; on September 15, the "Greenhouse Gas Emission Reduction Trading System" The "Measures for the Administration of Voluntary Gas Emission Reduction Trading (Trial)" were reviewed and adopted in principle. At this point, it is clear that CCER will restart.
As of 2017, the country has suspended the acceptance of CCER projects, and the total number of CCER registrations has reached 53 million tons. In July 2021, the national carbon emissions trading market opened and the first compliance cycle was completed by the end of the year. According to the "First Compliance Cycle Report of the National Carbon Emissions Trading Market" issued by the Ministry of Ecology and Environment, a total of approximately 32.73 million tons of national certified voluntary emission reductions (CCER) were used for quota settlement and offset in the first compliance cycle. It has brought about 980 million yuan in revenue to project owners/market entities, and the remaining tradable CCER in the market is about 10 million tons.
At present, my country's carbon market has entered the second compliance cycle, and emission-controlled companies must complete the payment of quotas for 2021 and 2022 before December 31, 2023. Based on the data of the first compliance cycle (annual coverage of approximately 4.5 billion tons of carbon dioxide emissions) and the 5% offset ceiling ratio, the second compliance cycle will cover approximately 9 billion tons of carbon dioxide emissions, and the maximum theoretical demand is 450 million tons, forming a huge CCER supply gap.
In addition, the second compliance cycle, which is about to end at the end of this year, adopts a flexible compliance policy, which allows companies with large quota gaps to advance part of their quotas in 2023 for current settlement. In addition, the "Greenhouse Gas Voluntary Emission Reduction Trading Management Measures (Trial Implementation)" ) has been passed and is about to be released, which means that a large number of CCER projects will be reviewed and registered before the end of the year, the CCER accumulated since 2017 will be released, and used to control the compliance of emission companies through carbon market transactions. At the same time, since the CCER methodology has not yet formed a system, many CCER projects may not have time to complete certification and enter market transactions before the end of 2023. Then the complying enterprises may take more flexible compliance measures: advance the 2023 quota for the second After the completion of the contract, CCER will be purchased to make up for the quota advanced from 2023. In this case, according to the above estimation results, it may approach the maximum theoretical demand of CCER - 450 million tons.
Although the gap between supply and demand of CCER in the carbon market is huge, renewable energy has developed rapidly in recent years, and the transformation of enterprises to high-quality development has also been accelerated. There is a large amount of reserve CCER that needs to be released urgently. The collision of supply and demand will bring unprecedented vitality to the carbon market!
The restart of CCER will set off a "carbon neutrality" boom
The "Greenhouse Gas Voluntary Emission Reduction Trading Management Measures (Trial)" (draft for comments) announced by the Ministry of Ecology and Environment in July 2023 has undergone major changes compared with the 2012 version. In addition to the methodology, projects, emission reductions, review and verification In addition to optimizing the management methods of securities institutions, trading institutions, etc., it is worth noting that the draft for comments provides clear instructions on the use of CCER.
The 2012 version of the Management Measures does not specify how emission reductions are used. CCERs entered into carbon market transactions are mainly used as a supplement to carbon quotas 4 to offset the carbon emission quota settlement of compliance enterprises. The latest draft for comments clarifies that "certified voluntary emission reductions can be used for carbon neutrality, offsetting the settlement of quotas in the national carbon emissions trading market in accordance with relevant national regulations."
How does CCER offset the payment of quotas in the national carbon emissions trading market? This is actually nothing new. As early as 2021, the national carbon market has activated the CCER offset mechanism in the first compliance cycle, that is, key emission units can complete compliance by purchasing CCER to offset the payment of carbon emission quotas. For example, key emission unit A received a 100-ton carbon quota issued by the state, but actually produced 102 tons of carbon emissions. Unit A can offset its excess carbon emissions by purchasing 2 tons of CCER in the carbon market. Thus, compliance with the contract is completed (the offset limit of CCER is 5%) without being subject to over-discharge penalties.
How can CCER be used for carbon neutrality? For example, if a company produces a certain product, during its entire life cycle (such as from the mining of raw materials to the disposal of waste after use), click on the full life cycle to learn more, popular science | Are the clothes you wear low-carbon? ? That article) will produce a certain amount of carbon emissions. By purchasing carbon offsets, the company can use it to offset the same amount of carbon emissions, thereby making the product "carbon neutral" and able to obtain the product through authoritative certification. Carbon neutrality certificate (click here for specific cases). CCER, as China's certified voluntary emission reduction, is expected to be further integrated into the international system and recognized in the future, and will also have the opportunity to be used as an effective carbon offset for product carbon footprints.
For another example, a company holds a large-scale event. In addition to the energy and material consumption during the event that will produce carbon emissions, the participants' transportation, dining, and accommodation will also produce carbon emissions. Calculate the carbon emissions generated by the entire event. The total amount of carbon emissions and the corresponding amount of CCER is purchased to offset it, this activity can be called a "carbon neutral" activity.
Therefore, in addition to being a supplement to carbon market quotas, CCER will also become an important means to achieve "carbon neutrality" at all levels. As a financial asset, CCER can support the development of more financial derivatives and improve the liquidity, market activity and trading enthusiasm of the carbon market; as a financial asset, CCER can support the development of more financial derivatives and improve the liquidity, marketability and trading enthusiasm of the carbon market. and trading enthusiasm. CCER is an important means to achieve carbon emission reduction goals and an important measure for my country to improve the carbon trading market and achieve the "3060" carbon peak carbon neutrality goal.
The above is the first issue of CCER brought to you by Carbon Balance Technology. For relevant reference materials and opinions, please contact the public account for consultation and discussion. Subsequent CCER series articles will be interpreted according to the latest policies.
 The definition of CCER comes from the "Carbon Emissions Trading Management Measures (Trial)" issued by the Ministry of Ecology and Environment in December 2020;
 The carbon market, that is, the carbon trading market, this article mainly refers to the national carbon emissions trading market, which is a market that trades emission rights of greenhouse gases such as carbon dioxide as commodities, including the mandatory performance market and the voluntary emission reduction market. , there are two main types of basic products: carbon emission quotas and certified voluntary emission reductions (CCER, CER);
 The 1997 Kyoto Protocol marked the first time that governments considered accepting legally binding greenhouse gas emission limit/reduction obligations;
 Carbon quotas can also be called carbon emission rights. According to the "Carbon Emissions Trading Management Measures (Trial)", they refer to the carbon emission quota allocated to key emission units within a specified period;
 In the table, the CCER project is divided into two phases. From 2012 to 2017, refer to the "Interim Measures for the Management of Voluntary Greenhouse Gas Emission Reduction Trading", and after 2023, refer to the "Measures for the Management of Voluntary Greenhouse Gas Emission Reduction Trading (Trial)" ( Draft for comments).