In Depth: How China’s Revamped Voluntary Carbon Scheme Could Help Achieve Green Goals

China has relaunched its primary voluntary carbon market scheme, the China Certified Emission Reductions (CCER), which had been halted seven years ago due to poor performance. The reboot is part of a national strategy to strengthen carbon trading mechanisms, aiding in China's green goals [para. 1][para. 2]. Initially established in 2012, the scheme allows environmentally friendly projects to quantify and sell their carbon reductions. It was suspended in 2017 because of low participation and inadequate verification processes [para. 3].

The Ministry of Ecology and Environment (MEE) has now imposed more stringent standards for the CCER program, ensuring better measurement, validation, and setting eligibility criteria for projects. This revamp aligns with China's National Emissions Trading Scheme (ETS), a compulsory carbon market launched in 2021 [para. 4]. The ETS is globally the largest in terms of volume, covering 2,532 key power sector emitters responsible for roughly 40% of China's total emissions in 2023 [para. 5]. Companies can now use CCERs to offset up to 5% of their emissions, often at a lower cost than ETS credits [para. 6]. This dual mechanism aims to solve the carbon credit shortage, stabilize prices, and financially support greenhouse gas reduction projects [para. 7].

Since May 2022, around 60 million tons of CCERs have been utilized in pilot and national carbon markets, generating approximately 2 billion yuan ($275 million) for greenhouse gas reduction projects [para. 8]. Despite the 2017 suspension, existing projects continued trading, preparing the market for the relaunched scheme [para. 9]. The largest initial transaction under the resumed scheme saw two subsidiaries of state-owned CNOOC Ltd. trade 250,000 tons of credits to offset emissions from gas-fired power generation [para. 10].

The revamped CCER scheme includes four new project types—offshore wind farms, solar thermal power plants, mangrove development, and forestry. The MEE released detailed guidelines for each project type, including stringent criteria for their implementation [para. 11][para. 12][para. 14][para. 15]. These projects are typically managed by large state-owned enterprises due to high investment and technical complexity [para. 12]. The projects, such as those using solar thermal technology, are critical for achieving necessary returns on investment, underscoring the significance of emissions reduction revenue [para. 16].

Solar thermal projects, although more environment-friendly, are costly, producing power at a higher rate compared to coal-fired electricity. They require substantial financial and policy support from CCERs to remain viable [para. 17][para. 18]. For instance, CGN New Energy's solar thermal project in Delingha required a 1.7 billion yuan investment and yields significant power and emissions reduction annually [para. 19]. The company aims to dramatically expand its solar thermal capacity, involving over 210 billion yuan in investment by 2030 [para. 20]. Offshore wind power also shows considerable growth, having an installed capacity of 37.29 million kilowatts by the end of last year [para. 21].

The inclusion of new project types reflects a dual strategy in addressing carbon emissions: clean energy generation through offshore wind farms and solar thermal power plants, and ecological carbon sinks like mangrove development and forestry [para. 23][para. 24]. While clean energy projects deliver immediate emission reductions, sequestration projects focus on long-term environmental benefits, raising awareness about essential ecosystem functions [para. 25].

This dual approach combines immediate emission reduction benefits with long-term ecological goals, catering to broader environmental conservation principles and educational objectives [para. 26].