China’s voluntary carbon market issues CCER 2.0 trading rules, excluding block trades

Beijing Green Exchange, which hosts the domestic voluntary carbon market, China Certified Emission Reductions, or CCERs, released new trading rules Dec. 27, following the market's relaunch, permitting only listed transactions and not providing a timeline for introducing auctions or block trades.

The CCER system paused project registration in 2017 to refine regulatory frameworks. After seven years, the first CCER 2.0 project was registered on Dec. 3, 2024. Market sources said that the first set of CCERs could be delivered in the first half of 2025; however, the latest trading rules could hinder presale and buyer-side project investments.

The Beijing exchange said that in addition to listed transactions, it will introduce block trades and auctions "when the time is ripe."

"We encourage entities to trade CCERs through listed transactions in this initial phase in order to stabilize market expectations, enhance liquidity and help create price signals," the exchange said in a statement released along with the trading rules.

Block trades and auctions present relatively higher barriers to market entry, which might not be suitable for a nascent CCER market, the exchange added.

The exchange's latest trading rules were concise. Apart from specifying the types of trading activities that would be accepted, the only other rule focused on who could trade CCERs.

The exchange stated that only legal entities and some other organizations approved by the government are currently allowed to trade CCERs, but it plans to gradually open the market to allow individuals to trade CCERs in the future.

Individuals have relatively limited capability to manage the risks associated with CCER trading, the exchange said. Therefore, delaying their enrollment could help mitigate these risks and ensure the healthy development of the CCER market.

Market reaction

Some project developers and traders expressed concerns over the exclusion of block trades in the initial trading rules. In the international voluntary carbon market, as well as China's CCER 1.0 market -- the market for old CCERs registered before 2017 -- block trades commonly support presales and facilitate buyers' early investments in carbon projects before the issuance of carbon credits.

"A lot of carbon deals are made through presale agreements," said a Singapore-based carbon trader. "Before a project's carbon credit issuance, a buyer can choose to pay a certain amount of deposit to the project developer. In this way, the buyer becomes the project's investor. After the carbon credits are issued, this buyer can get them at a preagreed, lower-than-market price."

For such early-stage investments to occur, the exchange must allow block trades and offline negotiations, the trader said, noting that these investments are crucial for scaling up CCER projects and markets.

"It is not only about getting a better price. Buyers want better visibility of the projects and early-stage participation; otherwise, trust issues and integrity concerns will never be resolved," the trader said.

A Beijing-based carbon market analyst said the Beijing exchange's key consideration is to have better control and create a more transparent marketplace. "Listed transactions provide transparent bids, offers and price information. However, for block trades, most activities will be offline, and the exchange only acts like a data hub and a clearing house," said the analyst.

Price signals

China's legacy CCERs issued before 2017 have nearly exhausted, and the carbon crediting process for new CCERs has become slower, leading to difficulties in price discovery amid limited supplies.

Market analysts said the China Emission Allowance, or CEA, price is a critical benchmark to monitor.

In China's national compliance carbon market, compliance entities are permitted to purchase CCERs to offset up to 5% of their liable emissions. Given that these entities could become significant buyers of CCERs, market participants expect the compliance market's CEA prices to be closely correlated with CCER prices.

The weighted average CEA price was Yuan 97.74/mtCO2e ($13.59/mtCO2e) on Dec. 27, official exchange data showed.

TABLE 1: China's compliance carbon market data

TABLE 2: China's compliance carbon market historical data