Tianjin announces CCER restrictions just weeks ahead of compliance

Published 11:35 on June 1, 2015  /  Last updated at 13:13 on January 20, 2016  /  China, China's Offset Market, China's Pilot Markets  /  No Comments

CCERs from hydroelectric projects and non-CO2 projects have also been ruled out, it said, and offsets from Tianjin, Beijing and Hebei would be prioritised.

Just weeks ahead of its annual compliance deadline, China’s Tianjin has introduced restrictions on CCER use in its carbon market that make ineligible all the offsets that have traded in the last three months.

The Tianjin Development and Reform Commission (DRC) has issued a document to ETS participants, saying offsets from emission cuts older than Jan. 1, 2013 will be ineligible for compliance use in the local emissions market, the 21st Century Business Herald reported Monday.

CCERs from hydroelectric projects and non-CO2 projects have also been ruled out, it said, and offsets from Tianjin, Beijing and Hebei would be prioritised.

Carbon Pulse spoke to two traders in the market who had seen the document and confirmed the content.

The restrictions will be effective immediately, meaning those CCER types cannot be used for 2014 compliance, which was originally scheduled to have been done by May 31, but was recently delayed until the end of June.

The restrictions are similar to rules introduced in Beijing, Chongqing, Guangdong and Shanghai, but came as a surprise as most observers had expected all CCER types to be eligible in Tianjin after the local exchange in March allowed a batch of 60,000 pre-CDM CCERs to trade.

That initial deal sparked further similar trades in Tianjin, as pre-CDM CCERs – ineligible in most other pilot markets – account for the vast majority of offsets issued by the NDRC so far.

In April, trading firm Timing Carbon bought 200,000 pre-CDM CCERs on the Tianjin exchange, followed later that month by UK-headquartered Carbon Trading Capital buying over 500,000 more – both saying they had already sold most of the volume on to local emitters.

Those CCERs are now ineligible for compliance use, but it is unknown whether the new restrictions will impact the signed contracts.

“It really hurts these compliance companies who had purchased CCERs and shows that it is a game controlled by the government, not a market,” one trader who wished to remain anonymous told Carbon Pulse.

While the ruling illustrates the regulatory risk in the Chinese markets and will unexpectedly cause economic losses for some firms, it will also reduce supply in a market already considered significantly over-allocated.

The Tianjin permit price has been fixed at 18.95 yuan ($3.06) for eight straight trading days, the third lowest price in China, with only 300 permits changing hands.

By Stian Reklev – stian@carbon-pulse.com

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