Energy Insider: China Readies Relaunch of Voluntary Carbon Credits Program, Key Battery Materials Face Export Curbs

Four state agencies release green development strategy for oil refineries, hydrogen-powered van travels over 1,000 kilometers

A solar power plant in Jincheng, Shanxi, on June 18, 2022. Photo: VCG

In this week’s Caixin energy wrap, we analyze China’s biggest climate and energy news on policy, industry, projects and more:

• Imminent relaunch of carbon credits program

• Export restrictions on key battery materials

• Beijing urges more provinces to save energy

• Green development strategy for oil refineries

• Hydrogen-powered van completes long trip

In focus: China relaunching carbon credits after six years

What’s new: China’s central government is set to revive its voluntary carbon credits program, the China Certified Emission Reductions (CCER), after shelving the scheme in 2017 due to a lack of uptake and regulatory issues.

China’s Ministry of Ecology and Environment (MEE) and the State Administration for Market Regulation updated measures for voluntary carbon trading on Oct. 19, which set the legal foundation for the program’s reboot.

On Oct. 24, the MEE announced the first four types of carbon-reduction projects eligible for selling carbon credits: Offshore wind farms, solar thermal power plants, mangrove development and forestry. It also published their respective methodologies, which detailed how these projects should be carried out and how to calculate and verify the emissions they help reduce.

The following day, the ministry revealed the various organizations that will be responsible for setting up the registry of CCER projects and for providing trading services.

Why it matters: Power companies are expected to be the main buyers of carbon credits in China, as they are required by the Chinese government to offset their emissions each year. But other heavy-emitting industries are expected to enter the market soon.

Power companies can use carbon credits to offset up to 5% of their annual emissions. Beyond that, they will have to use their allocated carbon permits or buy extra permits through the country’s national carbon market. The latter is largely separate from the voluntary CCER market.

Such a setup means the relaunch of the CCER can bring more participants into the national carbon market indirectly, as the developers and operators of carbon-reduction projects will be able to sell credits to power companies, Song Yutong, a carbon analyst at Refinitiv, told Caixin.

EV: Key battery materials face export controls

What’s new: China plans to tighten export restrictions for some graphite materials and their products, key for making batteries used in electric vehicles.

In a joint notice published on Oct. 20, the Ministry of Commerce and the General Administration of Customs listed two types of graphite that cannot be shipped overseas without government permission, as of Dec. 1.

They are high-purity, high-strength and high-density synthetic graphite material and its products, and natural flake graphite and its products.

A spokesperson from the Ministry of Commerce said that the restrictions are being introduced on the grounds of national security and interests.

Why it matters: Graphite is key to manufacturing batteries because it is an essential part of an anode, the negative electrode of a battery.

China is the world’s largest graphite producer. In 2021, it produced 79% of the global output, followed by Brazil, which accounted for just around 7%, according to research institute Lead Leo. Most of the world’s graphite reserves are in China, Brazil, and Turkey, it said.

Policy: Beijing urges more provinces to step up energy-saving efforts

What’s new: The National Development and Reform Commission (NDRC), China’s top economic planner, summoned more regional officials to urge them to pick up the pace for hitting mandatory energy-saving targets.

The NDRC recently held meetings with officials from Zhejiang, Anhui, Guangdong, and Chongqing. The regions were deemed moving too slowly in controlling their energy intensity — a key gauge for China’s energy transition — for the 14th Five-Year Plan period from 2021 to 2025, the NDRC said in a WeChat post on Oct. 19.

Beijing warned that the four regions’ management of energy-intensive and high-emitting projects was lax and there were shortcomings in key energy-saving sectors, such as industrial, construction, transport, and public services. They were also urged to increase their consumption of renewable energy.

Why it matters: The talks indicate Beijing’s seriousness in ensuring that all provincial-level regions hit their targets by 2025. The NDRC already cautioned Hubei, Shaanxi, Gansu, and Qinghai over their slow progress in a round of goal-hitting talks last month.

This year, as the mid-point of the latest five-year plan, is when the government evaluates the progress of the various objectives to be achieved by 2025, Zheng Ying, an energy expert, told Caixin previously. She expected the summoned provinces to face more pressure to save energy in the next two years.

Policy: Four departments release green strategy for oil refineries

What’s new: Four state-level government agencies — namely the MEE, NDRC, National Energy Administration, and Ministry of Industry and Information Technology — have released guiding opinions on green development for the oil-refining sector.

The document, published on Oct. 25, set a target for the sector to cap its total capacity for processing crude oil at under one billion tons by 2025. The order affirmed a target set two years ago in the country’s 2030 carbon-peaking action plan.

The opinions also set targets for the sector to increase its production efficiency and reduce pollution and carbon intensity by 2025.

By 2030, the sector’s equipment and energy efficiency should reach “advanced international levels,” and industrial-scale trials should be carried out for emissions-reduction technologies, such as green hydrogen energy and carbon capture, utilization, and storage, according to the document.

Why it matters: The guiding opinions were released less than two weeks after President Xi Jinping instructed the petrochemicals industry to promote high-quality development during a visit to a Sinopec plant in Jiangxi province.

Oil refining is an important sector of the petrochemical industry because it not only shoulders the responsibility of ensuring national energy security, but also provides raw materials for industry chains downstream, an MEE spokesperson said.

The carbon emissions from oil refining and the manufacturing of chemical goods in China average almost 600 million tons annually, or 6% of the national total, said Li Mingfeng, head of the Sinopec Research Institute of Petroleum Processing in a 2022 report.

Transport: Hydrogen-powered van completes over 1,000-kilometer trip

What’s new: A van powered by hydrogen fuel cells has completed a 1,160-kilometer-long delivery in China, its operator SPIC Hydrogen Energy Tech announced on social media on Oct. 23.

The journey began at a hydrogen fueling station in Beijing. From there the van traveled through Tianjin and Hebei province before reaching a hydrogen fueling station in Shandong province. The vehicle then returned to its depot in Beijing, making one stop to refuel in Tianjin.

The company said that the trip tested the reliability of hydrogen energy infrastructure and marked a breakthrough in using the alternative fuel in long-distance logistics.

Why it matters: China is trying to drive the use of hydrogen in transport to help reduce emissions. Delivery vans and coaches are the priority for deploying hydrogen fuel cells, followed by long-distance trucks and other heavy-duty vehicles, according to a 2020 government-commissioned technical roadmap designed by the China Society of Automotive Engineers for China’s new-energy vehicles.

However, whether fossil fuels or renewable energy is used in the production of hydrogen can greatly affect its benefit for reducing emissions. In recent years, China has stepped up its efforts to establish green hydrogen facilities, which use wind or solar power for production.

SPIC Hydrogen Energy Tech did not specify whether its van used green hydrogen in its trip.