China to Use Offset Market Revival to Support New Climate Action

(Bloomberg) -- Small-scale solar projects and afforestation are being considered as sectors to generate new emissions reduction credits under a revival of China’s stalled offsets market, according to people familiar with the details. 

The issuance of new China Certified Emissions Reduction credits, or CCERs — which are intended to reward activities that help avoid or remove the release of greenhouse gases — halted in 2017 to prevent the creation of a supply surplus.

Utility-scale renewable energy projects are expected to be excluded from generating new credits, with officials focused on using the system to help bolster the viability of smaller projects or new sectors, according to the people, who asked not to be named as the details are private. 

China’s Ministry of Ecology and Environment didn’t immediately respond to a request for comment. The ministry released some details last week on plans for a resumption in trading of CCERs, without specifying when the market will restart. 

Trading in offsets and also in a national market for emissions permits has so far underwhelmed in China, with major polluters put under little pressure to accelerate efforts to limit their climate impact. Use of CCERs is intended to spur investment in activities that can help China achieve President Xi Jinping’s goal of peaking emissions before 2030 and hitting net zero by 2060. 

The price of CCERs could rise to 63 yuan ($8.72) a ton in 2025 and 88 yuan in 2030, assuming they are traded at a 20% discount to the emissions permits, Citic Securities Co. said in a note. Beijing’s plan to expand the industries covered by the carbon market could boost supply of the credits to 470 million tons a year by the end of the decade, it said.

The CCER issuance system will reopen to a small number of project types this year, including rooftop solar systems smaller than 6 megawatts, the people said. Officials are examining offshore wind, biogas, methane emissions reductions and work to improve the energy efficiency of buildings for credit issuance in the coming years, according to the people.

The Week’s Diary

Tuesday, July 11:

• Nothing major scheduled

Wednesday, July 12:

• China’s agriculture ministry (CASDE) releases monthly supply and demand report

Thursday, July 13:

• China’s 1st batch of June trade data, incl. steel, aluminum & rare earth exports; steel, iron ore, copper, soybean, edible oil, rubber, meat & offal, oil, gas and coal imports; oil product imports and exports

Friday, July 14:

• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~3:30pm local time

On the Wire

China signaled more economic support measures are imminent after authorities took a small step toward supporting the ailing property market by extending loan relief for developers.

Iron ore jumped after Beijing called on lenders to step up relief measures for beleaguered property developers, who have been hit by a poor housing market for more than a year.

Pressures are increasing for China’s credit market, with onshore defaults mounting and concerns resurfacing about the country’s ailing property sector.

(Updates with Citic Securities note in 6th paragraph and China Commodities Today material lower.)

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