专业领域
Overview of Draft Rules for Issuance and Trading Rules of GECs
To regulate the issuance and trading of Renewable Energy Green Electricity Certificates (“GECs”), the National Energy Administration issued a notice on April 26, 2024, soliciting opinions on the draft Rules for the Issuance and Trading of Renewable Energy Green Electricity Certificates (“Rules for GECs Issuance and Trading”). Regarding the main contents of the Rules for GECs Issuance and Trading, we have summarized the key points as follows:
1. Legislative Background
Before formulating the Rules for GECs Issuance and Trading, the main rules related to the issuance and trading of GECs in China were based on the The Notice on Prepared well in Full Coverage of Renewable Energy Green Power Certificates to Promote Renewable Energy Power Consumption issued by the National Development and Reform Commission, the National Energy Administration, etc. on August 3, 2023 发改能源〔2023〕No.1044, “1044 Notice”). 1044 Notice clearly defines the scope of application of GECs as vouchers for renewable energy power consumption, which can be traded for consideration, and initially clarifies the framework for the issuance and trading of GECs, but lacks specific provisions on the details of GECs trading, the operation of the trading system, etc. According to Article 19 of 1044 Notice, the National Energy Administration is responsible for formulating rules for the issuance and trading of GECs. Therefore, after a period of actual trading, the National Energy Administration drafted the "Rules for GECs Issuance and Trading" to further clarify the specific content of the issuance and trading of GECs.
2. Scope of Application of GECs
Corresponding to Parts II and III of 1044 Notice, the Rules for GECs Issuance and Trading once again clarify the scope of renewable energy generation projects eligible for GECs issuance, including domestically produced wind power, solar power, conventional hydropower, biomass power, geothermal power, ocean power, etc., and explicitly state that existing hydropower projects before January 1, 2023, are temporarily not eligible for green certificate issuance. At the same time, the Rules for GECs Issuance and Trading re-emphasize the uniqueness of GECs, namely, they are the sole vouchers for renewable electricity production and consumption in China. We believe this is also an important foundation for promoting mutual recognition of GECs with other international standards.
3. Issuance of GECs
Issuer: Article 4 of the Rules for GECs Issuance and Trading specifies that the responsible authority is the Electricity Business Qualification Management Center (referred to as the "Qualification Center") under the National Energy Administration, with technical support provided by the National Renewable Energy Information Management Center (referred to as the "Information Center"). Compared with the Rules for the Issuance and Voluntary Subscription of Green Electricity Certificates (Trial) issued by the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration in 2017 (发改能源[2017]132号), the issuing authority has been changed from the Information Center to the Qualification Center, a public institution directly under the National Energy Administration. Article 17 of the Rules for GECs Issuance and Trading states that the data required for GECs issuance needs to be initially reviewed by the Information Center and then rechecked by the Qualification Center.
Trading Parties: Article 8 of the Rules for GECs Issuance and Trading explains the parties in trading of GECs. There are only two types of sellers: registered power generation companies or project owners. Sellers need to be registered, open accounts in the trading system and trading platforms, the system and platform will synchronize account information. It is worth noting that buyers can be any legal entity, non-legal entity organization, or individual that meets the requirements.
Issuance Period: Article 13 of the Rules for Issuance and Trading stipulates that GECs will be issued on a monthly basis.
Validity Period: Article 24 of the Rules for Issuance and Trading specifies that GECs have a validity period of two years, starting from the natural month of electricity production. This corresponds to the recommendation in the report on Chinese GECs by the RE100, which suggests "clarifying the validity period of green certificates."
Uniqueness: According to Article 11 of the Rules for Issuance and Trading, sellers must also commit to only applying for Chinese GECs and not applying for other certificates with similar nature in the electricity sector. This requirement is consistent with the provisions of 1044 Notice and has a significant impact on domestic power generation project owners' choices between applying for green certificates or international certificates like I-REC. Other certificates with similar nature in the electricity sector may include "green electricity consumption certificates", which can be obtained when consuming green electricity at provincial electricity trading centers. The Rules for Issuance and Trading explicitly state that sellers should not apply for certificates with similar nature like this.
Moreover, how to ensure the connection between green certificates and the carbon market still needs further clarification. Due to the possibility of China Certified Emission Reduction (CCER) applications for concentrated solar power projects and offshore wind power projects, Article 11's requirement of not applying for other certificates with similar nature in the electricity sector may not include CCER applications. A notice issued by the NDRC, the National Bureau of Statistics, and the NEA in early 2024 only explicitly stated the need to "explore the functional boundaries and connection mechanisms with voluntary greenhouse gas reduction mechanisms as soon as possible." Article 28 of the Rules for Issuance and Trading only stipulates "supporting the effective connection between GECs and renewable energy power consumption responsibility weights, dual controls on energy consumption, and the carbon market. The National Renewable Energy Information Management Center, together with power grid enterprises and electricity trading institutions, will promptly account for relevant GECs transaction data." We look forward to relevant departments clarifying how GECs will be connected to the domestic carbon market soon.
4. Trading Platforms, Trading System and Accounts
Trading Platforms: GECs can be traded independently. The trading platforms include the China Green Electricity Certificate Trading Platform, as well as the Beijing, Guangzhou Electricity Trading Centers. Additionally, GECs can also be traded alongside green electricity, conducted through the Beijing, Guangzhou, and Inner Mongolia Electricity Trading Centers. Up to now, the trading platforms mentioned above are the only ones available for green certificate/green electricity transactions. However, future expansion of platforms may occur based on actual demand (and we believe primarily based on the demand for green electricity trading).
Trading System: The trading system, also known as the GECs Issuance and Trading System, can undertake the issuance of GECs to accounts, online verification of GECs, information statistics, and disclosure functions. The trading system can provide support by scanning QR codes to provide information such as GECs codes, project names, project types, and electricity production dates. It can also assist the Qualification Center in aggregating and regularly disclosing trading reports and information. Each trading platform can consolidate transaction information into the trading system, and the Qualification Center can transfer GECs based on transaction information through the trading system.
Accounts: Trading parties should establish unique real-name accounts in the trading system. Sellers’ accounts need to be pre-registered, then open accounts in the trading system, and automatically synchronize with various trading platforms. Buyers’ accounts can be opened in both the trading system and various trading platforms, and buyer registration information in the trading platforms will synchronize with the trading system.
5. Trading of GECs
Article 18 of the Rules for Issuance and Trading explicitly states that GECs can be traded separately or together with green electricity transactions, thus affirming the two trading modes of “certificate-electricity separation” and “certificate-electricity integration”. Parties involved in transactions can also separately specify the terms of GECs quantity, price, and delivery time in certificate-electricity integration contracts, thus delivering GECs and green electricity separately.
Trading Methods: Article 21 of the Rules for Issuance and Trading lists various trading methods, including listing trading, bilateral negotiation, centralized bidding, etc., with market-based formation of trading prices. Bilateral negotiations are encouraged, where buyers and sellers sign medium to long-term bilateral contracts within or between provinces, and agree in advance on the quantity, price, and delivery time of bilateral transactions.
Trading Frequency: The Rules for Issuance and Trading specify that green certificates can only be traded once at the current stage, denying the existence of secondary market for GECs. While there are instances of power companies selling GECs in practice, in conjunction with the provisions of Article 8 of the Rules for Issuance and Trading regarding the two types of sellers, whether power companies can continue to sell GECs in the future remains to be further examined.
6. Future Prospects
Although there are still some issues to be clarified regarding international mutual recognition of GECs and their connection with the carbon market, as one of the world's largest renewable energy markets, the promotion and refinement of GECs are essential mechanisms to ensure the competitiveness of the renewable energy market and are also crucial components of achieving the carbon peaking and carbon neutrality goals.
Notes:
[1] https://www.ndrc.gov.cn/xxgk/zcfb/tz/202308/t20230803_1359092.html.
[2] According to its official website, the National Renewable Energy Information Management Center is a national renewable energy information management institution established and operated by the National Energy Administration and constructed and managed by the China Renewable Energy Engineering Institute in 2013. http://www.creei.cn/web/support.html
[3] https://www.nea.gov.cn/2017-02/06/c_136035626.htm#
[4] https://www.there100.org/sites/re100/files/2020-10/Chinese%20GEC%20Paper_RE100_2020%20FINAL.pdf
[5] "Notice on Strengthening the Connection between Green Electricity Certificates and Energy Conservation and Carbon Reduction Policies to Vigorously Promote Non-Fossil Energy Consumption (发改环资〔2024〕113号)" Article 9.
About the authors:
Mr. Jiang Zexie (Dante) is a partner and member of management committee of Guantao Shanghai Law Firm and Secretary-General of Guantao Law Firm’s Carbon Neutrality and Environmental Policy Research Center. Dante graduated from East China University of Political Science and Law and London School of Economics and Political Science (L.S.E.). Dante is focus on cross-border M&A and carbon neutrality and he has practical insights in several industries, including automotive, new energy, innovative finance, TMT and advanced manufacturing.
E-mail: jiangzx@guantao.com
Ms. Zhou Wanning (Eva) is a partner and Vice Chairman of the International Investment Committee of Guantao Hangzhou office, and a practicing lawyer in China and California, USA. She holds a Bachelor's degree in International Economic Law from East China University of Political Science and Law and a Master's degree in International Economic Law from the Chinese University of Hong Kong. She specializes in international investment and financing, international trade, and commercial dispute resolution.
Email: zhouwn@guantao.com
* Paralegal Zhang Yuke (Irene) also contributed to this article.
