China Revives Its Carbon Credit Market: Price Swings & Future Outlook

Globe and Mail

18-03-2025

China has reopened its voluntary carbon credit market after eight years. This has caused sharp price swings. A Bloomberg report showed that the new China Certified Emission Reduction (CCER) credits rose to 107.36 yuan ($14.82) per ton.
This price was 21% higher than mandatory carbon allowances. However, it then fell to 72.81 yuan, a 17% discount.
The price shifts reflect strong initial demand and a limited credit supply. In the first five days, traders exchanged 911,000 tons of credits. That's almost three times the volume of China's mandatory emissions market.
Source: Bloomberg
Understanding the CCER Program
China's Certified Emission Reduction (CCER) program is key to the country's carbon market. It allows companies to trade carbon credits, supplementing the Emissions Trading System (ETS). CCER allows firms to create and sell carbon credits voluntarily.
However, this is different from the ETS, which sets limits on emissions. This approach promotes investments in clean energy and emission reduction projects.
The Ministry of Ecology and Environment (MEE) manages the CCER program. Project operators and verification agencies maintain transparency. On January 23, 2024, China's voluntary carbon market saw its first transaction. China National Offshore Oil Corporation (CNOOC) bought 250,000 tons of carbon credits.
CCER credits fall into two categories:
Emission allowances: Government-allocated quotas that companies must follow.
Certified carbon credits (CCER credits): Tradeable credits from emission reduction projects.
The program helps industries reduce emissions, manage carbon credits, and trade them for financial gain. High-emission sectors can offset quotas, while low-emission industries can trade credits and enhance their reputation. Renewable energy companies can use carbon credit revenue to improve profits.
A New Beginning for CCER Credits
The CCER program started in 2012 to reward projects that cut greenhouse gas emissions. China paused it in 2017 because of worries about project approvals. In 2024, the Ministry of Ecology and Environment revived the program.
It now focuses on four areas: afforestation, solar thermal power, offshore wind power, and mangrove restoration. This effort aims to promote green projects and help China meet its carbon neutrality goals.
Notably, the China Beijing Green Exchange (CBGEX) believes China's carbon market will expand significantly because of financialization. The estimated quota is 7 to 8 billion tons. Annual trading volumes could exceed 10 billion tons. Transaction values might top RMB 1 trillion (US$140 billion).
China's Carbon Emissions: 2025
China's emissions surged in 2023, putting the country off track from its goal of reducing carbon intensity by 18% under the 14th Five-Year Plan (2021-25). To stay on course for its 2060 carbon neutrality target, CO2 emissions must now drop by 4-6% by 2025.
Source: Carbon Brief
Expanding the Carbon Credit Market
The Bloomberg report further revealed more details about China's expansion of its carbon credit market.
China approved nine new projects expected to supply 9.5 million tons of carbon credits in 2025.
These projects include seven deepwater offshore wind farms and a solar thermal plant. Key state-owned companies leading these initiatives are China Three Gorges Corp, State Power Investment Corp, China Energy Investment Corp, and China General Nuclear Power Corp.
China's national carbon market, launched in 2021, initially covered power utilities. However, low liquidity and oversupply kept prices below European levels. It plans to include steel, aluminum, and cement producers by the end of 2025, expanding coverage to a larger share of national emissions.
BloombergNEF analyst Layla Khanfar explained that the market activity picked up a bit in February after a slow start. However, supply and demand are still lower than in early 2023.
Strengthening ETS to Counter CBAM Impact
China is a top exporter of CBAM-liable goods. From 2026 to 2040, it will likely ship about 868.94 million metric tons of these commodities, according to a forecast from S&P Global Commodity Insights. Iron and steel account for 42% of these exports, cement 8%, and aluminum 6%.
The country's ETS (launched in 2021) now covers 40% of emissions and is set to expand to 8 billion tons. Major 2024 reforms include stricter allowance banking rules, a shorter compliance cycle, and the addition of CBAM-affected industries.
Clear Blue Market forecasted that the China Emissions Allowance (CEA) price, averaging 98 yuan (€13) in 2024, is projected to reach 100 yuan (€13) in 2025 and 200 yuan (€25) by 2030, with a market deficit expected by 2026.
Source: Clear Blue Market
To meet CBAM regulations, China requires factories emitting over 26,000 tons of CO₂ annually to verify emissions data. Thus, China is challenging the EU's CBAM at the WTO while reinforcing its ETS to align with global carbon pricing.
China is expanding carbon credits. The above-explained actions show a global push to regulate emissions. However, price volatility and economic concerns remain challenges. As carbon prices rise and regulations tighten, businesses must adapt to remain competitive. Lastly, the effectiveness of carbon markets in reducing emissions will be closely monitored.
For real-time insights into carbon pricing, visit our Live Carbon Pricing page.