On July 7, the Ministry of Ecology and Environment publicly solicited opinions on the Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading (Trial). After several extensions, the process of restarting the voluntary greenhouse gas emission reduction (CCER) market has finally been initiated. Since the suspension of CCER issuance in 2017, numerous emission reduction projects waiting outside the gate have been looking forward to the re-opening of CCER. However, the trial version has not clarified the types of projects supported by CCER and the solutions for already registered projects. Against the backdrop of China's carbon market construction system lagging behind expectations, this public consultation is a placebo released to the market, and we need to view it calmly.
I. Specific Contents of the Management Measures
On July 7, the official website of the Ministry of Ecology and Environment stated: To promote the achievement of carbon peak and carbon neutrality goals, encourage a wider range of industries and enterprises to participate in greenhouse gas emission reduction actions, and further standardize voluntary greenhouse gas emission reduction trading and related activities, public opinions are solicited on the Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading (Trial) (hereinafter referred to as the Management Measures). The main contents of the Management Measures are summarized as follows:
1. Basic principles for CCER projects: Voluntary greenhouse gas emission reduction projects must be authentic, unique, and additional. The emission reductions generated by the projects must be measurable, traceable, and verifiable.
2. Supported fields: Regarding the most concerned fields supported by CCER, the Management Measures do not give a clear answer, but propose that they will be determined through the released CCER methodologies. Considering the variety of voluntary emission reduction projects and the continuous emergence of new emission reduction technologies, the Ministry of Ecology and Environment will continue to publicly solicit methodology suggestions from the whole society, and select and release methodologies for industries and fields with significant emission reduction effects, high social expectations, low technical disputes, reliable data quality, and both social and ecological benefits, gradually expanding the supported fields of the voluntary emission reduction market.
3. Time requirements for CCER projects:
- CCER projects applying for registration shall start construction after June 13, 2012, the date when the Interim Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading was issued and implemented, as this date marks the establishment of China's voluntary emission reduction trading mechanism. Only projects started after this date have the additionality required for CCER.
- The emission reductions shall be generated after September 22, 2020 (the date when China declared the "carbon peak and carbon neutrality" goals) and within 5 years before the project application for registration.
4. Use of CCER: CCER can be used for quota offset in the national carbon emission rights trading market and local pilot carbon markets, carbon neutrality of large-scale events, etc. The offset policy for the part of CCER used for quota offset in the national carbon emission rights trading market shall be separately stipulated. According to the Measures for the Administration of Carbon Emission Rights Trading (Trial) implemented since 2021, key emission units can use CCER to offset the of carbon emission quotas each year, and the offset ratio shall not exceed 5% of the carbon emission quotas to be paid.
5. Handling of already registered voluntary emission reduction projects: For emission reductions that have been registered before March 14, 2017, the Management Measures propose that "the registration and registration institution shall continue to register them in the registration system and they can be used in accordance with relevant national regulations", but it is not clear whether such projects can be used as issued CCER.
II. Several Unresolved Issues
The public consultation on the Management Measures is a necessary step for the restart of the CCER market. However, issues such as the scope of CCER support, methodologies, and solutions for projects registered before 2017 remain unclear, and major issues related to the actual operation of the CCER market are still unresolved. They mainly include:
1. Controversies over supported fields and project types
CCER is similar to a subsidy granted to emission reduction projects in the environmental field, with a certain economic compensation effect. At the same time, the official confirmation of the green value of emission reduction projects, with policy-oriented endorsement, makes it a target for many emission reduction projects to compete for. However, due to the limited offset ratio in the carbon market and insufficient motivation for enterprises to voluntarily purchase CCER as an emission reduction method, the capacity of the CCER market is limited. The situation of "more monks than porridge" has led to greater controversies over supported fields. The trial version of the *Management Measures* does not clarify this issue, but only continues to emphasize authenticity, uniqueness, and additionality. For projects with their own characteristics such as renewable energy substitution, comprehensive energy conservation, and forestry carbon sinks, it is still a case of "each arguing their own reason".
2. Methodologies become the biggest bottleneck for the substantive restart of CCER
CCER methodologies are important bases for guiding project development, implementation, accounting, and verification. The Management Measures propose that the Ministry of Ecology and Environment will organize the collection, selection, and evaluation of methodologies, which need to meet the requirements of "significant emission reduction effects, high social expectations, low technical disputes, reliable data quality, and both social and ecological benefits". Before the National Development and Reform Commission suspended the issuance of CCER assets, as of 2017, 12 batches of 202 methodologies of various types had been formed. However, with the continuous development of emission reduction technologies, the current mixed methodologies no longer meet new needs and need to be sorted out, screened, and formed into a methodology system. The formation of a new methodology system still takes time, which has actually become the biggest bottleneck for entities applying for CCER.
3. Rationality of time node requirements based on "political declaration"
Newly applied CCER projects are required to start construction after the release date of the *Interim Measures* (June 13, 2012), while emission reductions need to be generated after China proposed the "dual carbon" goals, with a time span of up to 8 years. At the same time, emission reductions need to be within 5 years before the project application for registration. Based on this, currently, only emission reductions generated since September 22, 2020 can apply for CCER.
Annex: Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading (Trial)
