Pre-CDM projects dominate China’s offset portfolio

Published 04:55 on April 16, 2015  /  Last updated at 05:07 on April 16, 2015  /  China, China's Offset Market  /  No Comments

More than two-thirds of CCER projects approved by China’s carbon market regulator so far are pre-CDM projects, analysis by consultancy Hetan showed this week.

More than two-thirds of CCER projects approved by China’s carbon market regulator so far are pre-CDM projects, analysis by consultancy Hetan showed this week.

Of 138 projects cleared to generate offset credits for China’s carbon market, 95 are projects offering emission reductions from the period before they eventually were registered in the CDM, the analysis showed.

Only 35 of the projects are new.

The pre-CDM domination is a concern for emitters in Beijing, Chongqing, Guangdong and Shanghai, where those offsets are ineligible.

More than 99.5% of the CCERs issued so far are from pre-CDM projects, and although the market regulator is expected to issue a new batch of CCERs at an Apr. 29, meeting, traders say many emitters won’t be able to use any offsets for their 2014 compliance, with deadlines approaching in May and June.

Hetan’s analysis showed that the 138 approved projects have the capacity to generate 26 million CCERs annually. The 23 projects that have been issued offsets so far can yield 9.1 million each year.

The total theoretic annual CCER demand from the seven pilot markets is around 110 million, meaning the currently approved projects would only be able to satisfy a quarter of potential demand, even if none of the markets had restrictions in place.

The regulator recently rejected 33 projects that could have generated over 30 million offsets annually, as the government is tightening rules on additionality to prevent CCERs of dubious quality from flooding the market.

But even though supply is coming slowly, it is coming, the analysis showed. A total of 605 projects are at various stages in the approval pipeline, meaning there is likely to be a steady stream of CCERs available to emitters for next year’s compliance and when the national ETS begins in the second half of 2016.

Geographically, Hubei is the province with most projects in the pipeline at 52, followed by regions where wind and hydro is abundant: Xinjiang (51), Inner Mongolia (41), Yunnan (39), Sichuan (32) and Guizhou (32).

By Stian Reklev – stian@carbon-pulse.com

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