June 9 (Bloomberg) -- United Nations carbon regulators will consider new rules next month to make it easier for China to switch emission-reduction projects from the Clean Development Mechanism to a new domestic offset program.
China’s National Development and Reform Commission, the chief regulator, has so far approved 16 projects designed to cut annual emissions by almost 8 million metric tons, according to data on its website. Credits from the projects, originally intended for the UN market, may instead be used against limits set for China’s first seven emissions trading programs, according to Bloomberg New Energy Finance.
“The landscape of crediting instruments for emission reductions is getting more complex, with more systems emerging,” said David Abbass, a Bonn-based spokesman for the executive board of the UN Clean Development Mechanism. “What’s important is to find ways in which multiple systems can co-exist without stepping on each other’s toes.”
China, the world’s largest supplier of carbon-reduction credits under the UN’s global trading system, is shifting its focus to a domestic market designed to reduce the world’s highest emissions. The nation is studying how and when to set a peak for its greenhouse-gas emissions linked to climate change, Xie Zhenhua, China’s lead envoy to the UN’s global warming talks, told reporters June 5 in Bonn.
The UN, which currently has no procedures from withdrawing from registration under the CDM, will consider rules for that process at its next meeting in July, Abbass said.
China has issued almost 880 million credits, more than any other nation, under the UN market set up as part of the 1997 Kyoto Protocol. That market has ground to a halt because developed nations demanded far fewer credits than envisioned, pulling down the price of Certified Emissions Reductions to less than 10 euro cents ($0.14) in London, according to ICE Futures Europe.
While foreign investors now have little appetite for Chinese credits, China has launched six of seven planned pilot carbon markets that will create demand for as much as 63 million so-called Chinese Certified Emission Reductions, according to Charlie Cao, a Beijing-based analyst at Bloomberg New Energy Finance. Demand would be considerably higher if China establishes a national emissions market and pursues an absolute cap on emissions, he said.
With China’s first carbon markets allowing domestic offsets to be used against regional emission limits, there’s a push to salvage projects conceived under the Clean Development Mechanism by re-registering them as CCERs, Cao said.
Six of the offset projects approved by China’s NDRC have issued credits under the UN system, Cao said. Until the UN clarifies its rule on re-registration, the NDRC is awarding credits only for emission reductions achieved before the projects entered the UN system, Cao said.
“It has been uncertain whether CDM projects with issued credits are eligible for registration under the CCER until the CDM’s executive board gives the green light for deregistration,” Cao said. “I think this would have significant implications for the global Kyoto market if there is sufficient offset demand from the domestic markets as the coverage continues to expand.”
NDRC-approved offset projects that previously issued UN CERs include a hydroelectric projects in Sichuan Province, the Jilin Qianguo Fuhui wind farm, and the Guizhou Panjiang power generation projects from coal-mine methane.