China's ETS (Emission Trading Scheme) may incorporate cement and electrolytic aluminum industries in 2024
In January 2024, China's State Council approved the highest-level legislation of emissions trading, establishing stronger regulatory constraints on emission entities and third-party verification institutions. The cement and electrolytic aluminum industries are expected to be covered in China's National Emission Trading Scheme (National ETS) in 2024.
Meanwhile, the Chinese Certified Emission Reductions (CCER) has been restarted after a suspension of seven years, and it is expected that the quantity of emission reductions available for development, accreditation, and trading will still be limited in 2024.
During the second compliance period of two years, up to 88.5% of the total trading volume of National Carbon Emission Allowances (CEA) was traded in the final four months.
The cement and electrolytic aluminum industries are expected to be covered in the National ETS in 2024, as they have relatively simple production processes, and easier and more accurate access to emission data. According to statistics from SinoCarbon, carbon emissions from cement clinker and electrolytic aluminum industries account for 13% and 6% of China's total volume, respectively.
National CCER Market Resumed
On January 22, 2024, the National Greenhouse Gas Voluntary Emissions Reduction (GHG VER) Trading Market was resumed after seven years of suspension, with a total transaction volume of 375,300 tonnes on that day, at an average price of 63.51 yuan/tonne. Given only four methodologies for emission reduction projects have been approved, it is expected that the quantity of emission reductions available for development, accreditation, and trading will still be limited in 2024.
CCER is a supplementary choice for compliance in the national ETS. Both the pilot and national ETSs can use CCER to partly offset emission allowance compliances (ranging from 5%-10%). Over the past one year, the necessary detailed rules for national CCER trading -- project methodologies, technical rules, registration, trading platform regulations, emission reduction volume verification, and verification agencies - have been progressively put in place (see details in the attached figure).
Source: MEE, GL Consulting
Trading volume in the National ETS during the second compliance period exhibited a tidal trend, with the CEA prices rising substantially.
Throughout 2023, the total trading volume of CEA reached 212 million tonnes, which is more than four times the amount in 2022. Up to 88.5% of the total volume was traded between September and December 2023. The weighted average CEA price open bid transactions in the National ETS was 73.41 yuan/tonne, a 27.6% rise compared to 2022.
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Edited by Navy Liu: liuchuanjun@mysteel.com