ChinaCarbon.net.cn, March 27, 2017: The offset program may no longer be a part of the Chinese national emissions trading scheme (ETS) as per information leaked from a consultation document circulated to state level regulators and exchanges by the National Development and Reform Commission (NDRC). As per local sources, the NDRC is exploring the possibility of implementing an allowance-only scheme, at least during the start of the national ETS, in order to ensure stability during the early stages by taking offsets out of the equation.
The inclusion of offsets gives dual benefits to a cap-and-trade program. Since offsets are usually priced lower than allowances, compliance entities are allowed a cost-minimization strategy while meeting compliance. On the other hand, as compliance entities purchase offset credits they finance environmental projects which would otherwise be excluded from the scheme.
As can be expected, this proposal has caused uproar among stakeholders who have already approached provincial DRCs to voice their concerns.
“Offset stakeholders are reaching out to their local DRCs to bring the fallacy of this matter to the regulator’s attention”, said a source speaking to ChinaCarbon.net.cn. “It is a huge concern, as without the national scheme to support the Chinese offset projects, the developers would have to look to other offset regimes for financing or risk the death of their project.” It is unclear whether offsets would be allowed in the later stages of the national ETS but the scheme will continue in the pilot markets for the current compliance year.
Earlier this month, NDRC announced that it would halt issuances of Chinese Certified Emissions Reductions (CCERs) credits for the time being due to insufficient administrative resources required to cope with the large number of filing applications. Till date a total of 2,871 projects that have entered the pipeline in hopes of gaining tradable credits, of which only 349 projects have been issued them. The last issuance was made on November 18, 2016 which brought the total issued credits to 67,608,607. The average time for these credits to pass from the verification stage to issuance is 516 days. For more statistics on CCER issuances, see ChinaCarbon.net.cn’s report here.
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