A batch of pre-CDM CCERs was transferred to a steelmaker on the Tianjin Climate Exchange Tuesday, a move market participants said means the city’s ETS will likely accept the offsets that are banned in a number of other Chinese pilot markets.

Tianfeng Iron and Steel on Tuesday received the 60,000 CCERs, after having bought them from UK firm Carbon Trading Capital in November for around 8 yuan ($1.29) each. Tianjin permits closed Tuesday at 25.54 yuan.

The transaction, announced by the exchange, is the first time a compliance buyer in any of China’s pilot markets has received so-called pre-CDM CCERs, referring to offsets given to projects for emission cuts they achieved before they eventually got registered in the CDM.

The Tianjin government has yet to outline any restrictions on offset use but market participants said the fact that the trade cleared on the exchange means regulators are unlikely to ban pre-CDM CCERs.

The news is likely to reassure project owners there is some potential uptake for their offsets.

More than 99.5% of the roughly 15 million CCERs issued so far for China’s domestic market are pre-CDM, but they have been deemed ineligible for use in the Beijing, Chongqing, Guangdong and Shanghai markets.

As a result, a price gap has opened up in the market between pre-CDM CCERs and offsets from new projects, which are valued around three times higher.

By Stian Reklev – stian@carbon-pulse.com