CHINACHINAAndersHove,SeniorResearchFellow,OIES&GarySipengXie,PolicyAdvisorandBritishColumbiaAdvisortoCanada'sMinisterofNaturalResourcesGreencertificateswithChinesecharacteristics:WillgreencertificateshelpChina’scleanenergytransition?July2023December2021OIESPAPER:CE9OIESPAPER:ET06Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.i‘Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsmembers.Copyright©2023OxfordInstituteforEnergyStudies(RegisteredCharity,No.286084)Thispublicationmaybereproducedinpartforeducationalornon-profitpurposeswithoutspecialpermissionfromthecopyrightholder,providedacknowledgmentofthesourceismade.NouseofthispublicationmaybemadeforresaleorforanyothercommercialpurposewhatsoeverwithoutpriorpermissioninwritingfromtheOxfordInstituteforEnergyStudies.ISBN978-1-78467-213-3Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.ii‘AcknowledgementsTheauthorsgratefullyacknowledgethehelpfuladviceandcommentsprovidedbyPhilipAndrews-SpeedofOIES,SharonFengofAzureInternational,MichalMeidanofOIES,YanQinofRefinitiv,YeRuiqiofGreenpeaceEastAsia,ZhangSufangofNorthChinaElectricPowerUniversityandXuZhengofBP.Anyerrorsaretheresponsibilityoftheauthors.Thispaperwasfirstpublishedon1August2023.Itwasupdatedandre-postedon8August2023toreflectanewpolicyreleaseon3August2023.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.iii‘ExecutivesummaryGreenpowertradingisapotentialmarket-orientedapproachtopromotingacleanenergytransitioninChinaandshiftingawayfromthesubsidy-andplanning-basedapproachusedsofar.Inpractice,however,China’sleadinginstrumentforthispolicy,thegreencertificate,hasfacedseriousobstaclestoacceptance.Whilenewpoliciesandexistingtrendswillhelpresolvesomeoftheseobstacles,moremustbeovercomebeforeChina’sgreencertificatescanplayasignificantroleinacceleratingthecountry’sadoptionofclean,renewableenergy.Chinaisaleaderinrenewableenergy,includingwind,solar,andhydro.Windandsolar,knowninChinaas‘newenergy’,havebeensupportedbysubsidizedfeed-intariffs,minimumpurchaseamounts,quotas,andauctionsunderthegridparityprogramme,aswellasadditionalprogrammesfordistributedsolar.Mostwindandsolarcapacityisownedbystate-ownedpowercompanies,andthemajorityofitsoutputissoldtothegridwithoutanydirectparticipationbytheprivatesector,thoughthisischanginggradually.Foryears,Chinahasalsohadvariouspoliciestopromotetheprivatepurchaseofrenewableelectricity,mostnotablythegreencertificateprogramme.AChinagreencertificaterepresentsthefinancialpurchaseof1,000kWhofwindorsolarelectricity;thecertificatesareissuedbyaregulatoryentitytoqualifiedwindandsolargenerators,whichcanthensellthecertificatestoprivateorstate-ownedpurchasers,whichbuycertificatesonavoluntarybasis.Theinitialphaseofthisprogrammeproducedfewresults,butanuptickinmarketinterestsince2021andrecentpolicydocumentssuggestgreenpowerpurchasingislikelytoplayalargerroleinChina’spowersystem.JustasChina’sinternalelectricitymarketandsystemhavetendedtodivergefrominternationalexamples,China’sgreencertificatesystemisunique,andthecompatibilityofChina’sgreencertificateswithinternationalpracticesisunclear.Originallydesignedtohelpphaseoutgovernmentsubsidiesforwindandsolar,greencertificatesareundergoingatransitiontowardssupportingunsubsidizedwindandsolar.However,China’sgreencertificatemarketfacessignificantnear-termobstaclesaroundtransparency,regulation,anditsrole—whetherinmeetingthelow-carbongoalofprivatecompaniesorincontributingtotheprovincialtargetsandquotasonenergyconsumptionandrenewableintegration.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.iv‘ContentsAcknowledgements..............................................................................................................................iiExecutivesummary.............................................................................................................................iiiContents................................................................................................................................................ivFiguresandTables..............................................................................................................................ivIntroduction..............................................................................................................................................1BackgroundonChina’srenewableenergypolicies:Priorpolicysupportandsubsidiesforwindandsolar................................................................................................................................................2China’sgreencertificatepoliciesandmarket:Historyandpresentsituation...............................6Earlyhistoryofthemarket..................................................................................................................6Electricpowermarketreformsanddirectgreenpowertrading..........................................................9Potentialresolutionoffeed-intariffsubsidydeficit..............................................................................9ProblemsandchallengesforChina’sgreencertificatemarket.....................................................10Lowtradingvolumes.........................................................................................................................10Lackofadditionality...........................................................................................................................11Double-counting................................................................................................................................12Lackoftransparency.........................................................................................................................13CompetitionwithInternationalRenewableEnergyCertificates........................................................14Internationalrecognition....................................................................................................................15EvolutionofgreencertificatesoutsideofChinaandpotentialimpactonChina’smarket........17Conclusions:Variousbarriersremainbeforegreencertificatescanplayalargerrole.............18FiguresandTablesFigure1:Chinarenewableenergysurchargelevelsovertime,2006–2023,RMB/kWh........................3Table1:Cumulativegreencertificatessoldasapercentageoftotalgreencertificatesissued……….11Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.1IntroductionForalmostadecade,Chinahassoughttointroducemoremarketelementsintoitselectricitysector,bothtoimprovethesector’seconomicefficiencybyprovidingmoremarketpricesignalsforinvestmentandoperationandtoencourageparticipationofnewplayers,onboththegenerationsideandtheconsumptionside.Forrenewableenergy,whereChinahassoughttoreducedependenceongovernmentsubsidies,marketinstrumentssuchasgreencertificatesofferthepotentialtoinvolvepublicandprivatecompaniesinthecountry’scleanenergydeploymentwhilelesseningitssubsidyburden.In2017,whenChinalauncheditsgreencertificateprogramme,thecountrywasalreadytheworld’sleadinginstallerofrenewableenergyintermsofwind,solar,andhydro.Theinitialgreencertificatepolicyhadseveralstatedgoals,buttheleadingpurposewastoraiserevenuesforrenewablesfromtheprivatesector—particularlyfromprivatecompaniessuchasmultinationalconsumerbrands—andreducetheneedforsubsidiesandotherpolicysupport.Intheyearssince,subsidieshavebeenwithdrawnfornewprojectsandlimitedforolderprojects,butgreencertificateshavestillstruggledtotakeoff.Morerecently,tradingvolumeshaverisen,andinmid-2023amajornewreformintroducedthatcouldexpandtheroleofgreencertificates.ThepurposeofthispaperistotakestockofChina’sgreencertificateprogrammeandanswerthefollowingimportantquestions:(1)Towhatextenthavegreencertificateshelpedacceleratethedeploymentofrenewables,andwillthischangeinthenearterm?(2)Whyaregreencertificatepurchasevolumesincreasing,andwhateffectwillthishave?(3)HowattractiveareChina’sgreencertificatestoprivatecompanies—particularlyinternationalcompanies—andareChina’sgreencertificatesrecognizedinternationally?Thepaperisstructuredinfoursections.ThefirstsectiongivesbackgroundinformationonChina’srenewableenergypolicies,especiallyastheyrelatetogovernmentsubsidies,giventhatgreencertificatesbeganasastrategyforphasingoutandreplacingsuchsubsidies.ThesecondsectionprovidesanexplanationofthehistoryandpresentsituationofChina’sgreencertificatepoliciesandmarket.Thethirdsectiondiscussesproblemsandchallengesfacedbythegreencertificatemarket.ThefourthsectionevaluatestheextenttowhichChina’sgreencertificatesarelikelytoberecognizedbyinternationalcompaniesactiveinpurchasingrenewableenergyandrelatedinstruments.TheevolutionofrenewableenergypolicyinChinaandthegradualintroductionofmarket-orientedelementsintowholesaleelectricitytradingpointtoabrighterfutureforgreencertificatetrading.Thereasonsare:Whilethegovernmentstillseekstousegreencertificatesasatooltoraiserevenueforrenewableenergy—byencouragingbusinessesandindividualstopurchasecertificates,withpaymentoffsettinggovernmentsubsidyobligations—recentgovernmentpoliciestotopupthesubsidyfundmeanthereislessurgencytousesuchrevenuestosubstituteforthefeed-intariffdeficitowedbythegovernment.Thislessensthemarket’sperceptionthatgreencertificateslackadditionality,whichwasamajorobstacleintheearlyyearsoftheprogramme.Thetrendtowardsaresolutionoftherenewablesubsidydeficitmakesaddressingthisdeficitalesssalientpolicygoalforgreencertificates,butifgreencertificatesbecomesuccessful,thiscouldleadtofurthermovestoshiftolderwindandsolaroffoffeed-intariffs.Policymakersthereforehaveanincentivetoincreasetheattractivenessofgreencertificatesinthehopeoffurtherreducingthegovernmentsubsidyburden,evenafterthefeed-intariffdeficitisresolved.Anincreasingsupplyofwindandsolaroutputwithunsubsidizedelectricityproductionisavailableformarketingwithgreencertificates,andtheselower-costgreencertificatesissuedbyunsubsidizedwindandsolarprojectsaremoreeconomicallyattractiveforpurchasebytheprivatesectorrelativetogreencertificatesfromsubsidizedprojectsinthepast.However,despitethesepositivedevelopments,thereremainmanyobstaclestothedevelopmentofavibrantandactivegreencertificatemarketthatwouldcontributetoChina’slow-carbonpolicygoals.ThefutureevolutionofChina’sgreencertificatemarketishighlyuncertain,asistheextenttowhichgreencertificateswillberecognizedinternationally.OutsideofChina,thereisanincreasingshiftfrompoliciesthatsimplyaddmorerenewablecapacitytoensuringrenewablesareconsumedwhereandwhentheyareneeded.ThishasledtoapushinEuropeandNorthAmericatowardstime-matchedrenewablemarkets,whichcouldmeanChina’sgreencertificateswillbeoutofstepwithchangesinotherregions.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.2‘BackgroundonChina’srenewableenergypolicies:PriorpolicysupportandsubsidiesforwindandsolarThebackgroundofChina’sgreencertificatemarket,whichproperlybeganin2017asanadditionalsupportpolicyforwindandsolarenergy,islinkedtothehistoryofrenewableenergysubsidiesinChinathatdatebacktwodecades,andparticularlytothedeficitinsubsidypaymentsrelatedtothedesignofthecountry’sfeed-intariffforwindandsolarelectricitygeneration.Chinabeganpromotingwindandsolartechnologiesasearlyasthe1990s,andthecountry’sdomesticwindmarketreachedgigawattscaleinthemid-2000s,inpartduetotheCleanDevelopmentMechanismundertheKyotoProtocol,whichresultedinfinancialtransfersforChinesewindprojectsfromWesterncountriesseekingtocomplywithcarbonemissiontargets.1TherealinflexionpointforwindandsolarcapacityinChinatookplacearound2010–11.In2009,afterseveralyearsofpromotingwindpowerviasubsidizedcapacityauctions,Chinaintroducedasubsidizedfeed-intariffforwindenergy,grantingafixedpaymenttarifffor20yearstonewprojectsapprovedunderthescheme.2Subsidiesforwindcapacityauctionsandsubsequentfeed-intariffswerefundedthroughthecollectionofasurchargeonelectricitysalestomostcustomers.Agenerousfeed-intariffwasalsointroducedtocoversolarphotovoltaic(PV)in2011.3Theintroductionofthesesubsidizedfeed-intariffscoincidedwiththetake-offofthetwotechnologiesinChina:windpowercapacityrosefrom12GWin2008to63GWin2011,andsolarPVcapacityrosefromunder1GWin2010to3GWin2011andto16GWin2013.TheChinesefeed-intariffwasmodelledonthefeed-intariffintheGermanrenewableenergylaw4andsufferedfromsomesimilardrawbacks.Inparticular,China’sfeed-intariffwasadjustedonanannualbasis,andtypicallysuchadjustmentslaggedtheindustry’sprogressinreducingcosts.Thisresultedinaboom–bustpatternofwindinstallations—and,startingin2011,solarPVinstallations—thatultimatelyledwindandsolarcapacitytogrowfarbeyondgovernment-settargets.UnderChina’sRenewableEnergyLaw,gridcompanieswereobligatedtopurchasealltheelectricityoutputofwindandsolargenerators,andalloutputqualifiedforsubsidizedfeed-intarifflevels.However,gridcompanieshadlittleincentivetodispatchwindandsolarpowerovercoalpower,leadingtohighratesofcurtailedwindandsolaroutput:curtailmentreachedover17percentatitspeakforwindpowerin2016,and12percentforsolarPVin2015.5Further,governmentfeed-intariffsubsidyobligationsdramaticallyexceededrenewableenergysurchargerevenues,leadingtoanongoingproblemofrenewablesurchargedeficits,6eventhoughthecentralgovernmentsteadilyraisedthesurcharge,fromRMB0.001/kWhin2006toRMB0.019/kWhin2016(Figure1).AtRMB0.019/kWh,thesurchargerepresenteda3.2percentpremiumontheaverageretailelectricitypriceofRMB0.611/kWh.7After2016thegovernmentsignalledthatnofurthersurcharge1Zhen-YuZhaoetal.,‘TheimpactoftheCDM(cleandevelopmentmechanism)onthecostpriceofwindpowerelectricity:AChinastudy,’Energy,69,18April2014,athttp://dx.doi.org/10.1016/j.energy.2013.10.050.2‘国家发展改革委关于完善风力发电上网电价政策的通知,发改价格(2009)1906号[NDRCnoticeonimprovingthefeed-intariffpolicyforwindpowergeneration,NDRCPricing(2009)No.1906],’NationalDevelopmentandReformCommission,20July2009,atwww.ndrc.gov.cn/xxgk/zcfb/tz/200907/t20090727_965206.html.3‘关于完善太阳能光伏发电上网电价政策的通知,发改价格[2011]1594号[Noticeonimprovingthefeed-intariffpolicyforsolarPVpowergeneration,NDRCPricing(2011)No.1594],’NationalDevelopmentandReformCommission,24July2011,atwww.nea.gov.cn/2011-08/01/c_131097437.htm.4LiJunfengetal.,‘Astudyonthepricingpolicyofwindpower,’ChinaRenewableEnergyIndustryAssociation,GreenpeaceInternational,GlobalWindEnergyCouncil,2012,athttps://gwec.net/wp-content/uploads/2012/06/Report-wind-power-price-policy-china.pdf;‘TheGermanfeed-intariff,’FuturePolicy,accessed31May2023atwww.futurepolicy.org/climate-stability/renewable-energies/the-german-feed-in-tariff.5‘2019Q1&2windpowerinstallationsandproductionbyprovince,’ChinaEnergyPortal,26July2019,athttps://chinaenergyportal.org/en/2019-q2-wind-power-installations-and-production-by-province/;‘2015-2020年中国弃风弃光率,’GokuResearch,12January2020,atwww.wukongzhiku.com/chart/21742.html.6YukiYu,‘HowtoharvestfromChina’srenewableassetsales:Subsidy-not-receivablethebiggestthreat,’EnergyIceberg,2December2019.7Retailpriceof¥0.611/kWhbasedon‘我国电价的国际比较分析[Chinaelectricitypriceinternationalcomparisonanalysis],’State-ownedAssetsSupervisionandAdministrationCommissionoftheStateCouncil,23March2020,atwww.sasac.gov.cn/n16582853/n16582883/c17715327/content.html.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.3‘increaseswerelikely.8Asaresult,thesurchargedeficitcontinuedtogrow,reachingacumulativeRMB400billionby2021,withfollow-onimpactsonrenewableenergyequipmentprovidersandfinancingcostsforrenewableenergyprojects.9Figure1:Chinarenewableenergysurchargelevelsovertime,2006–2023,RMB/kWhSource:OIES,basedondatafromtheChinaNationalEnergyAdministration.8‘IIGF观点我国绿证交易现状分析及未来展望,’Envirunion,8March2022,atwww.envirunion.com/newsinfo-33592.html;ChangSu,‘某新能源企业由于可再生能源补贴被拖欠濒临倒闭，困局将如何破解？[Renewableenergycompaniesareonthevergeofbankruptcyduetoarrearsofrenewableenergysubsidies.Howwillthedilemmaberesolved?],’SolarOfWeek,13August2018,athttps://solar.ofweek.com/2018-08/ART-260006-8440-30256761.html.9WangZhixuan,‘王志轩：我国绿色电力市场化政策评述及改革建议[WangZhixuan:China’sgreenpowermarketpolicyandreformsuggestions],’ChinaElectricityCouncil,18January2023,atwww.cec.org.cn/upload/1/pdf/1611189701502.pdf.00.0020.0040.0060.0080.010.0120.0140.0160.0180.020.0010.0020.0040.0080.0150.019RMB/kWhThecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.4‘TimelineofkeypolicydevelopmentsrelatedtogreenpowerandgreencertificatesinChina2006:Introductionofrenewableenergysurcharge102009:Beginningofsubsidizedfeed-intariffforwindpower112011:Beginningofsubsidizedfeed-intariffforsolarPV122015:Document#9onDeepeningReforminthePowerSector132016:Requirementforfullpurchaseofrenewableenergy,14followedbyadditionalpolicyonminimumpurchaseofcertainhours152017:LaunchofGreenElectricityCertificates162019:NationalDevelopmentandReformCommissionannouncesmostsubsidizedfeed-intariffsforonshorewindwillbephasedoutbyyear-end2020172019:Approvaloffirstgridparity(unsubsidized)windandsolarPVprojects182019:Provincialrenewableenergyobligation(quota)192021,June:NationalDevelopmentandReformCommissionannouncestheendofthefeed-intarifffordistributedandcentralsolarPVbytheendof2021202021,September:Cross-provincialgreenpowertransactionsannounced212022:ImplementationPlanforNewEnergyConsumptionstatesthatrenewableenergywouldnotcounttowards‘dualcontrol’targetsforenergyconsumptionandenergyintensity222023:2310‘可再生能源发电价格和费用分摊管理试行办法[Renewableenergyelectricitypriceandcostdistributionpilotpolicy],’NationalDevelopmentandReformCommission,20January2006,atwww.gov.cn/ztzl/2006-01/20/content_165910.htm.11‘国家发展改革委关于完善风力发电上网电价政策的通知,发改价格(2009)1906号[NDRCnoticeonimprovingthefeed-intariffpolicyforwindpowergeneration,NDRCPricing(2009)No.1906],’NationalDevelopmentandReformCommission,20July2009,atwww.ndrc.gov.cn/xxgk/zcfb/tz/200907/t20090727_965206.html.12‘关于完善太阳能光伏发电上网电价政策的通知,发改价格[2011]1594号[Noticeonimprovingthefeed-intariffpolicyforsolarPVpowergeneration,NDRCPricing(2011)No.1594],’NationalDevelopmentandReformCommission,24July2011,athttp://www.nea.gov.cn/2011-08/01/c_131097437.htm.13‘关于进一步深化电力体制改革的若干意见[Opinionsregardingdeepeningreformoftheelectricpowersector],’ChinaStateCouncil,March2015,atwww.gov.cn/xinwen/2015-03/09/content_2831228.htm.14‘关于做好风电、光伏发电全额保障性收购管理工作的通知[WindandPVguaranteedfullpurchasemanagementpolicynotice],’NationalDevelopmentandReformCommissionandNationalEnergyAdministration,31May2016,atwww.ndrc.gov.cn/xxgk/zcfb/tz/201605/t20160531_963079_ext.html.15‘风电、光伏保障性收购年利用小时数核定公布[Wind,PVguaranteedpurchasehourspublished],’XinhuaNet,1June2016,atwww.cspplaza.com/article-7249-1.html.16‘三部门关于试行可再生能源绿色电力证书核发及自愿认购交易制度的通知[Noticeonthreeministriesissuingpilotrenewableenergygreenelectricitycertificatesissuanceandpurchaseinstitutions],’NationalDevelopmentandReformCommission,MinistryofFinance,NationalEnergyAdministration,3February2017,atwww.gov.cn/xinwen/2017-02/03/content_5164836.htm.17‘国家发展改革委关于完善风电上网电价政策的通知[Noticeonimprovingwindfeed-intariffpolicy],’NationalDevelopmentandReformCommission,24May2019,atwww.ndrc.gov.cn/xxgk/zcfb/tz/201905/t20190524_962453.html.18‘两部门关于公布2019年第一批风电、光伏发电平价上网项目的通知[Noticeontwoministriesapprovalof2019batchofwindandPVgridparityprojects],’NationalDevelopmentandReformCommissionandNationalEnergyAdministration,23May2019,atwww.gov.cn/xinwen/2019-05/23/content_5393967.htm.19‘关于建立健全可再生能源电力消纳保障机制的通知发改能源〔2019〕807号[Noticeontheestablishmentandimprovementofasafeguardmechanismforrenewableelectricityconsumption],NationalDevelopmentandReformCommissionandNationalEnergyAdministration,10May2019,athttp://zfxxgk.nea.gov.cn/auto87/201905/t20190515_3662.htm.20‘关于2021年新能源上网电价政策有关事项的通知[Noticeonthe2021newenergyfeed-intariffpolicyandrelatedprograms],’NationalDevelopmentandReformCommission,11June2021,atwww.ndrc.gov.cn/xxgk/zcfb/tz/202106/t20210611_1283088.html.21‘我国绿色电力交易试点正式启动——绿电消费有了’中国方案’[Chinagreenelectricitytradingpilotkicksoff,greenpowerhasa“Chinesesolution”],’People’sGovernmentofChina,9September2021,atwww.gov.cn/xinwen/2021-09/09/content_5636363.htm.22‘促进绿色消费实施方案[Implementationplanforpromotinggreenconsumption],’NationalDevelopmentandReformCommission,21January2021,atwww.ndrc.gov.cn/xwdt/tzgg/202201/t20220121_1312525.html.23‘关于做好可再生能源绿色电力证书全覆盖工作促进可再生能源电力消费的通知[NoticeonCompletingWorktoEnableGreenCertificatestoFullyCoverRenewableEnergyandPromoteRenewableEnergyConsumption],’ChinaNationalDevelopmentandReformCommission,3August2023,athttps://zfxxgk.ndrc.gov.cn/web/iteminfo.jsp?id=20256Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.5‘Topreventanincreaseinsurchargedeficits,thecentralgovernmentplacedvariouslimitsonthewindandsolarcapacitydifferentprovincescouldaddtothegridunderthefeed-intariff.24Feed-intarifflevelsfornewprojectsweresteadilyreduced,and—ultimately—subsidizedfeed-intariffsforonshorewindandsolarPVwerephasedout,startingin2020.OnshorewindandcentralizedsolarPVplantscontinuetobesupportedbyvariouspolicies,particularlythe2019gridparityprogramme,whichprovidednewwindandsolarPVprojectswith20-yearnegotiatedpowerpurchaseagreements,providedtheycouldofferpricesatorbelowprevailinggridtariffs.25Suchprojectsdonotreceivethesubsidizedfeed-intariff,buttheproblemofthefeed-intariffdeficitremains,giventhatolderprojectscontinuetogenerateelectricitythatqualifiesforfeed-intariffpayments.26Further,recognizingthatsomeprovinceshadnotfulfilledthemandatorypurchasehoursrequirements—arequirementadoptedbyNEAtopreventarbitrarycurtailmentofwindandsolarinfavourofothergenerationsources—thecentralgovernmentreducedtheobligationofprovincestopaysubsidizedfeed-intariffsforolderprojects,specifyingthatprovinceswouldonlybeexpectedtopayfeed-intariffsubsidiesforalimitednumberof‘minimumoperatinghours’.27TheseminimumsweredefinedinJune2016,whentheminimumpurchasewassetas1,800–2,000hoursperyearforwindenergyand1,300–1,500hoursperyearforsolar.28Foryears,someprovincesfloutedeventhereducedminimumoperatinghoursrequirementsandpreventedrenewablesourcesfromsellingpowerbeyondobligatoryminimums.29In2020,theMinistryofFinanceclarifiedthatfeed-intariffswouldbepaidinmostprovincesaccordingtoacalculationof‘reasonablelifetimeoperatinghours’,basedonthefourwindresourceclassesandthreesolarresourceclassesestablishedforwindandsolarfeed-intariffs.30Thereasonableoperatinghourslistedinthepolicyworkouttoacapacityfactorbetween21percentand27percentforwind,andbetween12percentand17percentforsolar.Thesepolicieson‘guaranteed’,‘minimum’,and‘reasonable’operatinghoursencouragedprovincestosetupadditionalmarketsforselling‘excess’renewableenergyproductionbeyondtheseamounts,includingviainterprovincialtrading.Thenumberssetforminimumpurchase,andlaterforreasonableoperatinghours,effectivelycreatedagreaterincentiveforwindenergytosellintopowermarketsbylimitingfeed-intariffpayments.Nationally,in2021windproducedfor2,246hours,oracapacityfactorof25percent,withsomeprovincesabovea29percentcapacityfactor.Forsolar,thenationalaveragewas1,161hours,a13percentcapacityfactor,withsomeprovincesabove1,500hours(18percentcapacityfactor).31Inotherwords,theaveragewindpowerplantproduced10percentmoreelectricitythantheminimumpurchaserequirement,andtheaveragesolarplantproducedaboutthesameamountofelectricityastheminimumpurchaserequirement.Fewerprovinces,however,exceededthereasonableoperatinghoursstandard,andyear-to-yearchangesinoutputlikelymeanprovincesthatexceedthisstandardinoneyearwillnot24See,forexample,thelimitsplacedonvariousprovincesin2018in‘国家能源局关于发布2018年度风电投资监测预警结果的通知,’NationalEnergyAdministration,5March2018,athttp://fgcx.bjcourt.gov.cn:4601/law?fn=chl543s485.txt.25‘国家发展改革委国家能源局关于积极推进风电光伏发电无补贴平价上网有关工作的通知,发改能源[2019]19号[NDRCandNEAnoticeonpromotingwindandPVgridintegrationwithoutsubsidies],’NationalDevelopmentandReformCommissionandNationalEnergyAdministration,7January2019,atwww.ndrc.gov.cn/xxgk/zcfb/tz/201901/t20190109_962365.html.26WangZhixuan,‘王志轩：我国绿色电力市场化政策评述及改革建议[WangZhixuan:China’sgreenpowermarketpolicyandreformsuggestions],’ChinaElectricityCouncil,18January2023,atwww.cec.org.cn/upload/1/pdf/1611189701502.pdf.27‘关于做好风电、光伏发电全额保障性收购管理工作的通知:最低保障收购年利用小时数核定表[NoticeonwindandPVfullpurchaserequirement:Minimumobligationonpurchasehourstable],’NationalDevelopmentandReformCommission,1June2016,atwww.gov.cn/xinwen/2016-06/01/content_5078698.htm.28‘风电、光伏保障性收购年利用小时数核定公布[Wind,PVguaranteedpurchasehourspublished],’XinhuaNet,1June2016,atwww.cspplaza.com/article-7249-1.html.29‘刘汉元代表：落实可再生能源保障性收购和优先上网政策[LiuHanyuan:Fullyimplementrenewableguaranteedpurchaseandprioritydispatchpolicies],’SolarOfWeek,5March2021,athttps://solar.ofweek.com/2021-03/ART-260006-8440-30488119.html.30‘财政部：按合理利用小时数核定可再生能源发电项目补贴资金额度[MinistryofFinance:Subsidypaymentstorenewableswillbebasedonaproject’sreasonableoperatinghourscalculation],’XinlangCaijing,21October2020,athttps://baijiahao.baidu.com/s?id=1681122887191774130.31‘国家能源局举行新闻发布会发布2021年可再生能源并网运行情况等并答问[NEAholdspressconferencetoissue2021renewableintegrationstatisticsandrespondtoquestions],’NationalEnergyAdministration,29January2022,atwww.gov.cn/xinwen/2022-01/29/content_5671076.htm.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.6‘exceeditinallyears.AccordingtoanunweightedaverageofoperatinghoursstatisticsforwindandsolarPVbyprovinceandresourcegrade,in2020and2021windandsolaroperatinghoursacrossallresourcegradesexceededtherespectivewindandsolarreasonableoperatinghoursquotasby6percent,32thoughofcoursemanyindividualprojectswouldgreatlyexceedthisaverage.Inthewindsector,operatinghourshavetendedtoincreaseovertime,33potentiallyowingtolargerturbinesandimprovedefficiency.Withoutgreencertificatesorgreenpowertrading,thepolicyoflimitingfeed-intariffpaymentsfor‘excess’outputwouldtendtodiscourageinvestmentordispatchaimedtoincreaseefficiencyoroutputbeyondplannedlevels,penalizingthemostefficientprojects.Thesituationthatresultedfromthiscomplexsupportarrangement—subsidizedfeed-intariffs,deficitsinsubsidypayments,andoperatinghoursquotasforgridcompanypurchaseofrenewables—createdanimpetustofindalternativesourcesofrevenuetosupportrenewableenergyandencourageitsuptake.EntertheChinesegreencertificate—technicallyknownastheGreenElectricityCertificate,orGEC.China’sgreencertificatepoliciesandmarket:HistoryandpresentsituationEarlyhistoryofthemarketAvoluntarygreencertificatemarketwasestablishedin2017,exclusivelyforwindandsolarelectricity.Giventhepossibilitythatconsumerssuchasprivatecompaniesandindividualsmightbewillingtovoluntarilypayapremiumtopurchaserenewableenergy,thegovernmentestablishedthegreencertificateasaproofoffinancialpurchaseof1,000kWhofwindorsolarenergy.Generatorsthatsoldgreencertificateswouldforgotherighttoreceivefeed-intariffsubsidypaymentsforanypurchasevolumescoveredbygreencertificates.Hence,thescheme’sdesignprimarilyrelatedtoreplacingfeed-intariffsubsidies.Secondarytradingwasnotpermitted,andpurchasevolumeswerealmostnon-existentduetothehighpricesneededtojustifygeneratorsforgoingsubsidypayments.34Inlate2022,anewgreenpowermarketpolicyclarifiedthatgreencreditswouldserveasanaccountingsystemforimplementingquotasforenergyconsumption,underthe‘dualcontrol’systemestablishedin2016thatsetsannualprovinciallimitsfortotalenergyconsumptionandenergyintensityofGDP.Provincescouldcovertheirexcessiveconsumptionwithgreencertificates.35Fromtheirintroduction,thegovernmentviewedgreencertificatesasawaytoreducethegovernment’sfinancialburdentosubsidizerenewableenergyandtherebyhelpreducethefeed-intariffsubsidydeficit.InannouncingthetrialofChina’sgreenenergymarketin2017,theNationalEnergyAdministration(NEA)emphasizedthatagreenenergymarketwould‘beconducivetopromotingtheefficientuseofcleanenergyandreducingthedirectsubsidyintensityofnationalfinancialfunds,whichhaspositivesignificanceforbuildingsocialconsensusandpromotingenergytransformation’.3632Unweightedaverage;authoranalysis.Operatinghoursstatisticsbyprovinceandresourcegradetakenfrom‘关于2021年度全国可再生能源电力发展监测评价结果的通报[2021NationalRenewableElectricityDevelopmentSupervisionandEvaluationReport],’NationalEnergyAdministration,16September2022,atwww.nea.gov.cn/2022-09/16/c_1310663387.htm.33‘全国各省2014-2020年风电利用小时数[Nationalprovincialwindoperatinghours,2014-2020],’Caijing,26November2021,athttps://wind.in-en.com/html/wind-2412128.shtml.34‘关于试行可再生能源绿色电力证书核发及自愿认购交易制度的通知,发改能源[2017]132号[NoticeregardingtrialimplementationofrenewableenergyGreenElectricityCertificatesandvoluntaryprocurementandtradinginstitutions,NDRCEnergy(2017)No.132],’ChinaNationalDevelopmentandReformCommission,MinistryofFinanceandNationalEnergyAdministration,6February2017,atwww.nea.gov.cn/2017-02/06/c_136035626.htm.Forcritiques,seeYeZe,‘我国可再生能源绿色证书自愿认购交易规则评价与建议[NationalRenewableEnergyGreenCertificateVoluntaryPurchaseandTradingRules:AnAssessmentandSuggestions],’ChinaPower,30June2017,atwww.chinapower.com.cn/guandian/20170630/82827.htmlandwww.sohu.com/a/153973342_418320;AndersHoveandDanielWetzel,‘Chinaisplanningprovincialquotasforcleanenergy,’ChinaDialogue,23April2018,atwww.chinadialogue.net/blog/10574-China-is-planning-provincial-quotas-for-clean-energy-/en;ShengnianXu,‘Currentsituationofgreenelectricitycertificates,’GlobalEnvironmentalInstituteChina,29April2018,atwww.geichina.org/en/gei-insight-current-situation-of-green-electricity-certificates.35‘国家发改委：新增可再生能源消费不纳入能源消费总量控制[NDRC:Incrementalrenewableconsumptionwon’tcounttowardsenergyconsumptioncontrols],’XinhuaNet,17November2022,atwww.chinanews.com/gn/2022/11-17/9896248.shtml.36‘国家发展改革委财政部国家能源局关于试行可再生能源绿色电力证书核发及自愿认购交易制度的通知,’NationalDevelopmentandReformCommission,18January2017,atwww.ndrc.gov.cn/xxgk/zcfb/tz/201702/t20170203_962895.html.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.7‘Accordingtothe2017policy,agreencertificatewouldbeissuedforeachmegawatt-hourgeneratedbywindandsolarPVthatisregisteredinChinaandreceivesthefeed-intariffsubsidy.Hydro,nuclear,biomass,andotherelectricitysourcesdidnotqualifyforgreencertificates,asthepolicywasintendedmainlytopromotewindandsolar.ApurchaserofagreencertificatewouldreceiveanelectronicPDFofthecertificate,indicatingtheentity(powerplant),thetypeofenergyproduced(windorsolar),theyearofproduction,auniquenumberforthecertificate,andthenameofthepurchaser(ChinesebusinessorChineseindividual;internationalsalesorsalestoforeignerswerenotpossible).Thepurchaserwouldnotreceiveanyphysicalelectricitysuppliesasaresultofthepurchase:intheindustryparlance,acertificaterepresentedthepurchaseonlyofthegreenelectricity‘attributes’—inotherwords,therighttoclaimpurchaseofwindorsolarelectricity.Nootherattributeclaims,suchasregardingcarbonorotheremissions,weremadeforthecertificates.Toensuremaximumrevenueforrenewablegenerators,nosecondarytradingwasallowed.Thisdesignprovedunattractivetomostpotentialbuyers.AccordingtotheinitialpolicydocumentissuedbytheNationalDevelopmentandReformCommission(NDRC)andtheNEA,greencertificatesbecameavailableforpurchaseduringapilotperiodstartingon1July2017asavoluntarymarket.37Thedocumentindicatedthatthevoluntarymarketwouldbetransitionedintoacompulsorymarketstartingin2018.However,thecompulsorymarkethasnotmaterialized.Whilethegreencertificatepolicyincludedseveralobjectives,suchaspromotingrenewableenergydevelopmentandencouragingprivatesectoruptakeofcleanenergy,themainpurposefromthebeginningwasresolvingthedeficitinfundsavailabletopaysubsidizedfeed-intariffs.Eveninrecentyears,asthegreencertificatemarkethasdevelopedinnewdirections,resolvingthisdeficitcontinuestobecitedasoneofthemajorpurposesofthepolicy.Forexample,aslateasNovember2022,HuaxiaEnergywrote,‘Asthegreencertificatetradingmarketmatures,thepressureongovernmentrenewableenergysubsidiescanbereduced’.38In2019,theNDRCandtheNEAexpandedthenumberofprojectseligibletoissuegreencertificates,includinggridparityonshorewindpowerandcentralizedsolarPVprojects.39In2020,theMinistryofFinancesetatimelimitforrenewablesubsidiestofacilitatetransitiontothegreencertificatemarket:20yearsfromthedateofgridconnectionforwindpowerandsolarPVpowergenerationprojects,and15yearsafterthedateofgridconnectionforbiomasspowergenerationprojects.Regardlessofwhethersuchaprojecthasreachedthefulllife-cyclesubsidy,itwouldnolongerenjoythecentralgovernment’sfinancialsubsidyfunds;instead,suchprojectswouldbeinstructedtoissuegreencertificates.40Forseveralyears,Chinahasalsosetprovincialquotasforcleanenergypurchased—knownasa‘renewableenergypurchaseobligation’—specifyingpercentagevaluesforoverallrenewableenergyaswellasfornon-hydrorenewables.Thepolicyspecifiedthatprovincesandcoveredentities(provincialgridcompaniesaswellasmajorenergyconsumers)couldmeettheirquotasthroughvariousmeans,including(1)normalgridcompanypurchaseofguaranteedfulloperatinghoursfromrenewableplants,(2)directpowerpurchaseorbilateraltradingofexcessrenewableenergyfromwindandsolarplantsthatproducebeyondtheguaranteedminimumpurchaseamounts,and(3)purchaseofgreencertificates.However,thepolicydidnotleaddirectlytoanuptickingreencertificatepurchases,giventhatcoveredentitiescouldmoreeasilymeetthequotasbydirectpurchaseofrenewables,suchasthroughapowerpurchaseagreement.41ThoughtherenewableenergyobligationisoftencomparedtotherenewableportfoliostandardpolicyintheUnitedStates,inpracticeitdiffersinseveralways.Unliketherenewableportfoliostandard,renewableobligationtargetsaresetonanannualbasisforthepresentyear,oratmostayearahead,37‘国家发展改革委、财政部、国家能源局关于试行可再生能源绿色电力证书核发及自愿认购交易制度的通知,’NationalDevelopmentandReformCommissionandNationalEnergyAdministration,3February2017,atwww.waizi.org.cn/law/16690.html.38‘国内绿证发展趋势与发电企业应对策略,’HuaxiaEnergy,30November2022,athttps://hxny.com/nd-81443-0-17.html.39‘关于积极推进风电、光伏发电无补贴平价上网有关工作的通知,’NationalDevelopmentandReformCommissionandNationalEnergyAdministration,7January2019,atwww.ndrc.gov.cn/xxgk/zcfb/tz/201901/t20190109_962365.html.40‘关于促进非水可再生能源发电健康发展的若干意见,’MinistryofFinance,20January2020,atwww.gov.cn/zhengce/zhengceku/2020-02/03/content_5474144.htm.41YuhuanShenandCarolineAddy,‘RenewableenergyinChina—here’swhatyouneedtoknow,’SouthPole,8April2022,atwww.southpole.com/blog/renewable-energy-in-china-heres-what-you-need-to-know.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.8‘andsofararebasedlargelyontheamountofrenewableenergyexpectedtobeadded,ratherthanonapolicytargetdesignedtospuradditionalinvestmentinrenewablecapacity.Althoughforseveralyearstherewasminimalpurchaseofgreencertificates—forreasonsdiscussedbelowinthesectionon‘ProblemsandChallenges’—policymakerscontinuedtorefertogreencertificatesandgreenpowertradingasimportantelementsofongoingpowermarketreforms.In2022,theNDRCstatedthattheestablishmentofawell-functioninggreencertificatemarket—withthegoalofencouragingmoreprivatesectorinvolvementinrenewableenergy—ispartofthegoalsforChina’ssustainableconsumptionandpeakcarbonemissionsby2030.42The14thFive-yearPlanforaModernEnergySystem,issuedinMarch2022bytheNDRC,alsomentionstheneedtointegrateelectricity,carbon,andgreenpowermarkets.43In2022,theNDRCtookafurthermeasuretopromoterenewableenergybystatingthatprovincialenergyconsumptionquotas—underthesystemknownas‘dualcontrol’,whichsetstargetsfortotalenergyconsumptionaswellasenergyintensity—wouldbeadjustedsuchthatincrementalutilizationofrenewableenergy(includinghydro,biomass,wind,andsolar)wouldnotcountagainsttheannualquotas.TheNDRCstatedthatgreencertificatesissuedtoenergy-consumingcompaniesineachprovincewouldbeusedasthebasisforthecalculation,andprovincesshouldupgradetheirenergytrackingsystemstoincorporategreencertificatesintheenergyquotacalculations.Secondarytransferofgreencertificateswouldbeallowed‘inprinciple’,thoughitisunclearifsecondarytradingwouldbepermittedor,moreconservatively,justasinglesalefromageneratortoaconsumer.44Sincegreencertificatesarepresentlyavailableonlyforwindandsolarenergy,andtheNDRCpolicyisstatedonlyingeneralterms,itisunclearhowthissecondarytransferwouldbeimplementedinpractice.45InAugust2023,anewgreencertificatepolicywasannouncedbytheNDRCtogetherwithNEAandtheMinistryofFinancethatsignificantlyexpandedandshiftedthegreencertificateprogramme.46Thenewpolicyincludesthefollowingsignificantmeasures:1.Greencertificatescannowincludealltypesofrenewableenergy,includinghydropowerandbiomass,notjustwindandsolar;however,existinghydropowerprojectswillnotreceivegreencertificates,onlynew,“market-oriented”hydropowerafter1January2023willqualify.TheNDRCalsoexpectsthatnon-electricityrenewableconsumptionwilleventuallybeincludedatalaterdate.Distributedwindandsolargeneratorscanalsoreceivegreencertificates.2.ForthepurposesoftheDualControlpolicy,greencertificatescanbeusedtoshowcompliance.3.Tradingisallowed,but“inordertopreventspeculation”onlyasingletradewillbeallowed“atthisstage,”–meaningjustthesalefromageneratortoabuyer,withbilaterally-negotiatedpricesthatarepublishedontradingplatforms.474.“Inprinciple,”domesticrenewableenergyproducerscanonlyusegreencertificates,andmaynotissueI-RECs.Internationalrecognitionandpurchasingofgreencertificatesshouldbe42‘促进绿色消费实施方案,’NationalDevelopmentandReformCommission,21January2022,atwww.ndrc.gov.cn/xwdt/tzgg/202201/P020220121303052384813.pdf.43‘十四五现代能源体系规划[14thFive-YearPlanforaModernEnergySystem],’NationalDevelopmentandReformCommission,March2022,atwww.ndrc.gov.cn/xxgk/zcfb/ghwb/202203/P020220322582066837126.pdf.44‘关于进一步做好新增可再生能源消费不纳入能源消费总量控制有关工作的通知[Noticeonensuringincrementalrenewableenergyisnotincludedintotalenergycontrol],’NationalDevelopmentandReformCommission,16November2022,atwww.ndrc.gov.cn/xxgk/jd/jd/202211/t20221116_1341436.html.Regardingsecondarytrading,thedocumentstatesthatgreencertificates‘原则上可以转让[inprinciplecanbetransferred],’whichcouldrefertoasinglesalefromgeneratorstousers,ortosecondarytrading.45WangZhixuan,‘王志轩：我国绿色电力市场化政策评述及改革建议[WangZhixuan:China’sgreenpowermarketpolicyandreformsuggestions],’ChinaElectricityCouncil,18January2023,atwww.cec.org.cn/upload/1/pdf/1611189701502.pdf.46‘关于做好可再生能源绿色电力证书全覆盖工作促进可再生能源电力消费的通知[NoticeonCompletingWorktoEnableGreenCertificatestoFullyCoverRenewableEnergyandPromoteRenewableEnergyConsumption],’ChinaNationalDevelopmentandReformCommission,3August2023,athttps://zfxxgk.ndrc.gov.cn/web/iteminfo.jsp?id=2025647‘国家发展改革委、国家能源局有关负责同志就《关于做好可再生能源绿色电力证书全覆盖工作促进可再生能源电力消费的通知》答记者问,’NationalDevelopmentandReformCommission,3August2023,athttps://www.ndrc.gov.cn/xxgk/jd/jd/202308/t20230803_1359098_ext.htmlThecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.9‘encouragedandChinashouldparticipateinsettinginternationalstandardsformutualrecognition.5.Greencertificatesshouldbeintegratedwithcarbontrading,thoughthemethodforsuchintegrationisstilltobestudied.ItisunclearwhethergreencertificateswouldeventuallybeconsideredascarbonoffsetsorCCERsforthepurposeoftheChinacarbonETS.Thenewpolicyrepresentsasignificantevolutionofthegreencertificateprogramme,bothbyexpandingthequalifyinggenerationandbyclarifyingthatgreencertificateswillbeusedfortheDualControlpolicy,andeffectivelybanningtheissuanceofI-RECsbydomesticrenewablegenerators.Iffullyimplemented,thepolicyonDualControlcouldsubstantiallyincreasethedemandforgreencertificates.WhilebanningtheissuancesofI-RECsmayseemharsh,thiswouldeffectivelydeterdouble-countingofChineserenewablesunderbothgreencertificatesandI-RECs,andshouldthereforeimprovetheinternationalrecognitionofChinesegreencertificates.ElectricpowermarketreformsanddirectgreenpowertradingOngoingpowermarketreformsinChinathatbeganin2015havehadasignificantimpactonrenewableenergypoliciesandhaverecentlybeguntoresultinmoredirecttradingofrenewableenergy,buttheyhavethusfarhadlittleinteractionwithgreencertificatepolicies.Whereaswholesalepowermarkettradinginitiallyfocusedonmonthlyandannualoperatinghourcontractsfromcoalplants,renewableenergyprojectshavebeenincreasinglyencouragedtoparticipateinbilateraltransactions.Thisopenedupthepossibilityofdirectpowerpurchaseagreementsbetweenrenewableenergyproducersandconsumers,albeitforacomparativelyshortperiod,suchasayear(asopposedtoadecadeorlongerinNorthAmerica).Pilotspotmarketsinitiatedincertainprovinceshavealsoencouragedthe(limited)participationofrenewableenergygenerators,albeitusuallyasprice-takersratherthanbidders,usuallyforlimitedvolumes,andoftenresultinginlossesfornewenergyproducers.48Provinceshavealsotradedexcessrenewableenergyinterprovincially,albeitonacentralizedbasiswithprovincialgridcompaniesactingassinglebuyersandsellers,basedonfixedpricesandvolumes.49Bilateraltradingofgreenenergyhasincreasedrapidlysince2020.InSeptember2021,theBeijingPowerExchangeCentreandtheGuangzhouPowerExchangeCentreheldapilottradingsessionfordirectbilateraltradingofgreenenergybetweenprovinces,reportingtransactionsof8billionkWh,fortermsofayearormultipleyears.Over250marketentitiesin17provincesparticipatedintransactions.50Whileacontinuousmarkethasyettodevelop,provincialandinterprovincialbilateraltradingofrenewableelectricitycontinuestogrow.ZhejiangProvince,forexample,reportedthatitsprovincialgreenpowermarketreached2.7billionkWhin2022,sixtimesgreaterthantheprioryear.51Potentialresolutionoffeed-intariffsubsidydeficitAsnotedabove,by2021therenewableenergysurchargedeficithadreachedRMB400billion($56billion).Whilemostrenewablepowerplantsareownedbystate-ownedfirms—meaningthesubsidydeficitisbasicallyanIOUfromonegovernmentbranchtoanother—mediareportshaveconsistentlyshownthatthesedeficitscausehigherfinancingcostsforrenewableprojectdevelopersandfor48Fortworecentsummariesofconditionsforrenewablesinprovincialspotmarketpilots,see:‘最高损失30%，新能源参与现货交易现状与影响[Highestlossesof30%,newenergyparticipationinspottradingsituationandimpact],’StorageWorldNet(Chunjiewang),3May2023,athttp://chujiewang.net/domestic_detail/8104;ZhouJiawei,‘新能源参与现货市场之我见[Newenergyparticipationinspotmarketsandmyviews],’ThePaper,20February2023,athttp://paper.people.com.cn/zgnyb/html/2023-02/20/content_25967414.htm.49‘跨省区电力市场交易相关问题及政策建议[Cross-provincialpowermarketproblemsandpolicysuggestions],’ChinaElectricityCouncil,abstractpostedtoIn-en.com,11February2022,athttps://m.in-en.com/finance/html/energy-2250539.shtml.50‘我国绿色电力交易试点正式启动——绿电消费有了’中国方案’[Chinagreenelectricitytradingpilotkicksoff,greenpowerhasa‘Chinesesolution’],’People’sGovernmentofChina,9September2021,atwww.gov.cn/xinwen/2021-09/09/content_5636363.htm.51‘浙江2022年绿色电力交易增长6倍多[Zhejiang2022greenpowermarkettradingincreasesby6times],’Xinhua,10February2023,atwww.gov.cn/xinwen/2023-02/10/content_5740994.htm.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.10‘equipmentsuppliers,particularlyforprivateplayers.52Afteryearsoflettingrenewableenergysurchargedeficitsaccumulate,theadventofgridparity(unsubsidized)windandsolar,andforecaststhatthedeficitwouldcontinuetowidenthrough2028,seemtohavepushedthegovernmenttofinallyseekresolution.In2021,thegovernmentissuedvariouspoliciespromotingoptionsforsupportingrenewableenergyfirms,includingsecuritizationoffeed-intariffpaymentarrears.53During2022,therewereconsistentreportsthatcompanieswerereceivingfullpaymentoffeed-intariffs,includingthosearrears.Thegovernmenthadalsosubstantiallyincreaseditsfiscalbudgetformakingcatch-uppayments.54In2023,theMinistryofFinance,theNEA,andtheNDRCalsoannouncedthatprojectswithahighproportionofgreencertificateorbilateralgreenpowertradingsaleswouldqualifyforprioritypaymentofsubsidies,55suggestingthatthesubsidydeficitisnotcompletelyresolved.Overall,itappearsthatoneofthemajormotivationsfortheintroductionofthegreencertificatepolicyin2017maybenowatleastpartlyonthewaytoresolution,meaninggreencertificatescanfocusonunsubsidizedprojectsratherthanservingasasubsidyreplacement.ProblemsandchallengesforChina’sgreencertificatemarketLowtransactionvolumesFromtheinceptionofthegreencertificatemarketin2017,tradingvolumes—or,moreaccurately,purchaseamounts,giventhatsecondarytradingwasnotpermitted—weresmall.From2017to2020,atotalof300milliongreencertificateswereissuednationwide,butonly43,000werepurchased,roughly0.1percent.Byonecalculation,in2019greencertificatesonlyaccountedfor0.8percentofChina’srenewableelectricitygenerationand0.1percentofthecountry’selectricityconsumption.56Lowtransactionvolumesrelatedinparttothedesignofgreencertificatesasasubstituteforfeed-intariffsubsidiesthathadalreadybeengranted.Thismeantthatawindorsolargeneratorwouldforgoacontractualpaymentfromthegovernmentinexchangeforsellingthegreencertificate.Windandsolargeneratorscontinuedtoviewsuchsubsidypaymentsasguaranteed,albeitsubjecttodelays,andwerereluctanttosellgreencertificatesforfeed-intariffsubsidizedelectricityforsubstantiallylessthanthesubsidiesalreadypromised.Inaddition,windandsolarfeed-intariffsweresetatdifferentlevels,whichhasledtodrasticallydifferentpricesforwindandsolargreencertificatesandforsubsidizedversusunsubsidizedgreencertificates.In2022,theaverageofferpriceforgreencertificatesforsubsidizedwindpowerwasRMB208.6/MWh($29/MWh),andforsubsidizedsolarPVitwas628.8/MWh($88/MWh).GiventhewholesaleelectricitypricewasaroundRMB474/MWh($66/MWh),57theaveragegreencertificateofferprice(whichdoesnotincludephysicalelectricity,onlythecertificateitself)representedapremiumof44percentor132percentforwindandsolarPV,respectively.Onlyonetransactionforsubsidizedgreencertificateswasreportedfortheyear.58Thoughprivatecompaniesmayhavesomewillingnesstopurchasegreenenergyatapremium,despiteotherconcerns,thislevelofpremiumwasprohibitiveforanythingbutsymbolicpurchasesinnominalamounts.52XiJinghua,‘4000亿缺口，拖欠六年的可再生能源补贴有望补齐了[After6years,RMB400billionrenewableenergysubsidydeficithaspotentialtobemadewhole],’JiemianNews,28March2022,athttps://m.jiemian.com/article/7262295.html.YukiYu,‘HowtoharvestfromChina’srenewableassetsales—ornot,’EnergyIceberg,25November2019,athttps://energyiceberg.com/china-renewable-asset-sales.53XiJinghua,‘4000亿缺口，拖欠六年的可再生能源补贴有望补齐了[After6years,RMB400billionrenewableenergysubsidydeficithaspotentialtobemadewhole],’JiemianNews,28March2022,athttps://m.jiemian.com/article/7262295.html.54‘可再生能源发电补贴核查’进行时，4000亿缺口如何填补[Renewableenergysubsidyinspectionunderway,howtofillthecumulativedeficitofRMB400billion],’Number1Caijing,3November2022,athttps://m.yicai.com/news/101583223.html.55‘关于享受中央政府补贴的绿电项目参与绿电交易有关事项的通知[Noticeregardingapportionmentofcentralgovernmentsubsidiesandgreenpowertradingparticipation],’ChinaMinistryofFinance,NationalEnergyAdministration,NationalDevelopmentandReformCommission,27February2023,athttps://m.in-en.com/article/html/energy-2322611.shtml.56‘中国绿证市场进入快速发展期,’AllbrightLaw,2023,atwww.allbrightlaw.com/CN/10531/16cd580e114551a1.aspx.57¥474/MWhrepresentstheaveragebenchmarkcoaltariffplusa20percenttradingrangecapimplementedin2021.SeeYuyingQian,‘Chinaraisescaponelectricityprice:Whathaschangedandpossibleimpactforbusiness,’IntegralEnergy,March2022,atwww.integralnewenergy.com/?p=32919.58WangZhixuan,‘王志轩：我国绿色电力市场化政策评述及改革建议[WangZhixuan:China’sgreenpowermarketpolicyandreformsuggestions],’ChinaElectricityCouncil,18January2023,atwww.cec.org.cn/upload/1/pdf/1611189701502.pdf.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.11‘Subsequently,asmorewindandsolarplantshavecomeonlinewithnofeed-intariffsubsidy,thegreencertificatemarkethasstartedtogrow.AccordingtoNEAdata,in2021overahalf-milliongreencertificateswerepurchased,andpurchasesrosebyafactorof15toreach10.3millionin2022,accountingforroughlyone-sixthofcertificatesissued(Table1).59Bothwindandsolargreencertificatesarebeingpurchasedinsignificantvolumes.Table1:CumulativegreencertificatessoldasapercentageoftotalgreencertificatesissuedDateWind(%)Solar(%)Jul20170.030.04Nov20180.140.01Jun20190.150.01Oct20200.160.00Oct20210.280.21Aug20223.1515.50Apr202316.7640.10Source:OIES,basedonGreenEnergyPlatformdata.Thoughtradingvolumehasincreased,thereremainunexplaineddifferencesintradingacrossprovinces.Takingthewindpowerindustryasanexample,asof11October2022,Jilin,whichhasthehighesttransactionvolume,hadtradedatotalof941,792windpowergreencertificates,whileNingxia,whichhasthelowesttransactionvolume,hadtradedsixwindpowergreencertificates.60Whilesomedisparitycouldbeexplainedbytherelativeavailabilityofsubsidizedversusunsubsidizedcertificates,thatdifferencecouldnotbelargeenoughtoexplainthisdegreeofvariance.Onepossibilityisthattransactionsarestrongestinprovinceswithmoreforeigninvestmentormajorsupplychainsformajorinternationalconsumerbrands.WhiletheAugust2023greencertificatepolicymentions“trading,”itexplicitlystatesthatonlyasingletradeispermittedfromgeneratortobuyer.AnNDRCQ&Adocumentissuedatthesametimeasthepolicystatesthatthiswillprevent“speculation.”61Disallowingtradingalsoreducestheneedfortrackingsystemsandsimplifiesadministrationoftheprogramme.However,theabsenceoftradingreducestheattractivenessofgreencertificatesforseveralreasons.Tradingservesmultiplepurposes,includinginattributemarketscreatedbypolicy:Tradingprovidesadditionalpricetransparency,allowshedgingtomanagerisk,andgivesbusinessesflexibilitywhentheiroperationschangeorifpartsoftheirbusinessoperationschangehands.Insuchcases,tradinggivesanartificialassetlikeagreencertificateadditionalvaluebyinsuringthatthepurchaserisnotstuckwithitincasetheirownsituationchanges.LackofadditionalityUndertheinitialgreencertificatesystem,whereallgreencertificateswereissuedbyfeed-intariffsubsidizedwindandsolarprojectsandwherethepurchaseofacertificatereplacedthegovernment’sobligationtopaythesubsidy,thepurchaseofthegreencertificatedidnotencourageorrelatetoconstructionofneworadditionalwindandsolarcapacity.Ineffect,themoneywaspassedthroughto59‘国家能源局发布2022年可再生能源发展情况并介绍完善可再生能源绿色电力证书制度有关工作进展等情况,’NationalEnergyAdministration,14February2023,atwww.gov.cn/xinwen/2023-02/14/content_5741481.htm.60‘国内绿证发展趋势与发电企业应对策略,’HuaxiaEnergy,30November2022,athttps://hxny.com/nd-81443-0-17.html.61‘国家发展改革委、国家能源局有关负责同志就《关于做好可再生能源绿色电力证书全覆盖工作促进可再生能源电力消费的通知》答记者问,’NationalDevelopmentandReformCommission,3August2023,athttps://www.ndrc.gov.cn/xxgk/jd/jd/202308/t20230803_1359098_ext.htmlThecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.12‘thegovernment,almostresemblingacharitabledonation.AsoneChineseexpertputit,ifacompanywantstomakeacharitabledonation,‘wouldn’titbemoremeaningfultojustgivethemoneytoaschool?’62Theevolutionofgreenpowertradingandgreencertificatetradingawayfromsubstitutingforfeed-intariffsubsidypaymentsdoesnotresolvetheissueofadditionality.Twotypesofgreenpowertrade—excessoperatinghoursbeyond‘fullpurchase’,andprojectswhoseoriginalfeed-intariffhasexpired—arguablydonotconstituteadditionalenergyproduction,sincetheseprojectswereoriginallybuiltunderthepolicy-supportedfeed-intariff.Gridparityprojectsappearmorelikelytoqualifyasadditional,sincethemainpolicysupporttheyreceiveisintheformofpreferential(butunsubsidized)20-yearpowerpurchaseagreements.Ofcourse,additionalityisnotanabsoluterequirementandhasnotnecessarilybeenscrupulouslyabidedbyinthedesignofgreenpowermarketsworldwide.TheEuropeanguaranteeoforigin(GO)market,forexample,hasresultedinalargenumberoftransactionsfromolderhydropowerprojectsinScandinaviathatpredatetheGOmarket,orthelow-carbonenergytransitionitself,bydecadesormore.TheUSrenewableenergycertificate(REC)market,whichincludesbothmandatoryandvoluntaryRECmarkets,doesnothaveanyspecialrequirementsforexcludingprojectsthatreceivesubsidies,anddoingsowouldbeimpracticalgiventhatallwindandsolarintheUnitedStateshasgenerallyreceivedtheproductiontaxcreditorinvestmenttaxcredit.GreenpowermarketexpertWangZhixuanhaswrittenthatadditionalitywillprobablynotbeafeatureoffuturegreenpowermarketsinChinaeither,sincethepurposeofsuchmarketsisrelatedtothecountry’spolicygoals,suchaspromotingdomesticcleanenergytechnologyorencouraginggreateruptakeofrenewablesbyvariousprivateandstate-ownedcompanies,evenaftertheissueofthesubsidypaymentdeficitisresolved.63Forexample,ifgreencertificatescometoplayalargerroleinfulfillingprovincialrenewableenergyquotasorenergycontrolquotas(underdualcontrol),themarketwouldnotdependonadditionality.Double-countingBecausethegreencertificatemarkethasevolvedslowly,andnotintandemwithotherpolicychangesinpowermarketsandcarbonmarketsinChina,therehavebeenrepeatedconcernsaboutdouble-countingofgreencertificates.Inbilateralpowertransactionsinwhichthepurchaserofgreenenergyhasnotexplicitlyacquiredthegreencertificatesforapowertransaction,theymightstillclaimcreditforpurchasingwindorsolarpower,whilethepowerproducersellsitsgreencertificatesseparately.InitsAugust2023greencertificatepolicy,thegovernmentclarifiedthatgreencertificatesforpowerpurchaseagreementsormid-to-long-termpowertransactionswouldbedeliveredinbatchestothepurchasers,andsincenosecondarytradingisallowedthisimpliesnopotentialfordouble-countingwillexist.Similarly,theAugust2023policystatesthat“inprinciple,”domesticrenewablegeneratorsmayonlyreceiveChinesegreencertificates,andnotI-RECs,potentiallydeterringdoublesellingofgreenpoweroninternationalmarkets.Thesereformsarecertainlyhelpful,butitmaystillbedifficulttofullymonitorallclaimsofgreenpowerconsumption,especiallywhensuchclaimsaremadetoconsumersviaadvertising.Third-partyverificationistheusualmethod,butestablishingareliablethird-partyverificationschemeforallcorporategreenpowerclaimsmaytakesometime.Therehavebeenpersistentcallsforgreenpowermarketsandcarbonmarketstobefurtherintegrated.Currently,thecarbonmarketcoversonlythecoalpowerandcoalheatingsectors,whereasfeed-intariffs,greencertificates,andthepowermarketareconsideredseparate.CoveredentitiescanmeettheircarbonmarketobligationsinpartthroughChinaCertifiedEmissionReductioncredits(CCERs),forupto5percentoftheirannualobligation.TheissuanceofCCERswassuspendedforyearsduetoconcernsaboutdouble-counting,andrecentlythegovernmenthasissuedaguidancedocumentspecifyingthatrenewablesforwhichthegreencertificateshavebeensoldwouldnotqualifyfor62YaoJinnanandJiaKehua,‘绿色电力证书为啥少人问津？[Whydosofewpeoplecareaboutgreencertificates?],’Beijixing,2021,athttps://news.bjx.com.cn/html/20210118/1130286.shtml.63WangZhixuan,‘王志轩：我国绿色电力市场化政策评述及改革建议[WangZhixuan:China’sgreenpowermarketpolicyandreformsuggestions],’ChinaElectricityCouncil,18January2023,atwww.cec.org.cn/upload/1/pdf/1611189701502.pdf.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.13‘CCERs.64Indeed,incorporatingrenewablesintotheCCERmarketwouldresultindouble-countingofenvironmentalattributes.Later,intheAugust2023greencertificatepolicy,thegovernmentreiterateditsintentiontolinkthecarbonandgreencertificatemarkets,whileclarifyingthatthisremainssubjecttofurtherstudy.Thelinkwiththecarbonmarketisimportant,bothforthedomesticcarbonmarketandforpotentialcompliancewithinternationalcarbonrequirements.CompaniesinsectorsthatwouldbeexposedtotheEuropeanUnion(EU)CarbonBorderAdjustmentMechanism(CBAM)wouldpotentiallybenefitiftheycouldoffsetcarbonemissions(atleastforEUcompliance)bypurchasinggreencertificatesasproofofcleanerproduction.EvenifgreencertificatesaremoreexpensivethanpricesinChina’sdomesticcarbonmarket,theyareboundtobecheaperthancarbonpricesinEurope,whichwilldeterminetheleveloftheCBAM.TherehavebeencallstoestablishanofficiallinkbetweenpurchaseofgreencertificatesandCCERs.65Fornow,itappearsunlikelythatChinagreencertificateswouldoffsetanyCBAMexposure,especiallyifChina’spolicyofficiallyconsidersgreencertificatesentirelyseparatefromcarbonmarkets.LackoftransparencyChina’spresentgreenpowermarket,bothforpowerpurchaseagreementsandforgreencertificates,hasinadequatetransparencyaroundrulesandpoliciesaswellas,crucially,pricesandtrading.Thecoexistenceofthepowerpurchaseagreementmarket,thegreencertificatemarket,andpowermarkets,andtheirstepwiseevolutionalongseparatetimelines,showsthatthepresentgreenpowermarkethasdevelopedinanadhocfashion.Intermsofregulation,thereremainconcernsthatrulesandrequirementsatthehighestlevelarestillunclear.ScholarsattheDevelopmentResearchCentreoftheStateCouncilhavenotedthreeproblemsinthisregard.First,thoughtheNationalRenewableEnergyInformationManagementCentreissuesgreencertificates,ithasnotclarifiedwhichuniqueenvironmentalattributesthecertificatesrepresent(renewableproduction,orallenvironmentalattributes)orwhetherthegreencertificateistheonlycertificationofthoseattributes.AFebruary2023NEAstatementclarifiesthatgreencertificatesarethesolecertificateofgreenattributes,66astatementfurtherreemphasizedintheAugust2023policy,butthismaynotfullyresolvetheissue.67Along-termcontractfordistributedsolaroroffshorewindhasenvironmentalattributes,butthesesourcescannotobtaingreencertificates.Further,themeaningofgreencertificatesdependsinpartontheperceptionandrequirementsofdifferentbuyers,whichmaybelocatedoutsideofChinaorfacescrutinyfrommediaorenvironmentalorganizationsthatquestiontheattributesofgreencertificates,makingitdifficultforasinglegovernmentbodytocontroltheperceptionsofthegreencertificateanditsattributes.Second,thoughgreencertificatescanbepurchasedthroughthepowertradingcentrewherethegreenpowertradingpilotislocatedorthroughtheChinaGreenPowerCertificateSubscriptionTradingPlatform,thereisinsufficientdisclosureontheseplatformsofimportantattributesofeachcertificate.Lastly,Chinalacksaneffectivethird-partycertificationsystemandamutualrecognitionmechanismbetweengreencertificatesandthestandardsofimportantinternationallow-carbonorganizations.68Pricingtransparencyisalsolacking.WhiletheNationalRenewableEnergyInformationManagementCenteristheofficialplatformwherecompaniescanselectaprojectfromwhichtopurchasegreen64‘China’sdomesticvoluntarycarbonmarketreboottoshakeupglobaloffsetstrade,’S&PGlobal,8May2023,atwww.spglobal.com/commodityinsights/en/market-insights/latest-news/energy-transition/050823-chinas-domestic-voluntary-carbon-market-reboot-to-shake-up-global-offsets-trade;‘Corporatenetzeropathways:Shandongclarifiesrulestoavoidthedouble-countingofenvironmentalattributes,’AzureInternational,22August2022,atwww.azure-international.com/corporate-net-zero-pathways-shandong-clarifies-rules-to-avoid-the-double-counting-of-environmental-attributes.65HanXueandGaoShiji‘进一步完善绿电市场化机制的建议,’ChinaDevelopmentPress,4July2023,athttps://cdo.develpress.com/?p=14157.66‘王大鹏：绿证的核发和交易对推动可再生能源高质量发展，提升绿色电力消费水平具有重要意义[WangDapeng:Greencertificateverificationandtradingandrenewableenergyhighqualitydevelopment;increasinggreenpowerconsumptionhasimportantmeaning],’NationalEnergyAdministration,13February2023,atwww.nea.gov.cn/2023-02/13/c_1310697051.htm.67HanXueandGaoShiji‘进一步完善绿电市场化机制的建议,’ChinaDevelopmentPress,4July2023,athttps://cdo.develpress.com/?p=14157.68‘韩雪、高世楫｜低碳转型背景下绿电市场化机制设计的思考,’SohuNews,5December2022,atwww.sohu.com/a/613798446_807373.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.14‘certificates,thereissignificantactivityinmarketsoutsideoftheformalplatform.69Further,pricinginformationontheplatformsuggeststhepricingremainsstaticandconditionsfortradingsomewhatopaque.Asalreadymentioned,subsidizedprojectsmaintainhighpricesandlowtradingvolume,reflectingunwillingnesstosellgreencertificatesatlowerpricesandforgosubsidyrevenue.However,forunsubsidizedprojects,pricesarealmostallfixedatRMB50($7)percertificate,withonlyafewofferinglowerprices.Thismayreflectgovernmentguidanceabouttheappropriatepricelevel,oritmayindicatethatcompaniestrademorecertificatesbydirect,bilateralnegotiation,notviatheofficialplatform.Effectively,thereisnopropermarketforgreencertificatesand,therefore,noconsistentpricinginformationavailabletopotentialbuyers.TheAugust2023greencertificatepolicyclarifiesthatwhilemultipletradingplatformswillcontinuetoexist,allgreencertificatetransactionsshouldbepublishedinatimelyfashion—includinglistedtradesaswellasbilaterallynegotiatedtransactions.However,greencertificateswillbeissuedinbatchestocompaniesengagedinmid-to-long-termcontractswithrenewablegenerators,meaningthatthismarketanditspriceswillcontinuetobeseparatefromthegreencertificatemarket.Interestingly,ofthe99projectsthatsoldagreencertificateontheplatformin2022,24projectssoldonlyonecertificate,oftentothemselves.Tenprojectsaccountfor63percentoftrades,and20projectsaccountfor87percentofthetotalgreencertificatessold.Someprojectsareclearlyfavouredingreencertificatetrading,eventhoughthepricesareuniformlyatRMB50percertificate.Pricecompetitionisnotafactorinthismarket,andmanytradesmayrepresenttestsordemonstrationsthattheplatformworksorthatcompaniesareparticipatingatsomedeminimuslevel.Furthercomplicatingtheissueofpricetransparencyisthedirectpurchaseofgreencertificatesfromgenerators.Directlypurchasedcertificatesareoftencheaper,sometimesfromRMB20-30.70Suchdealsaremorelikelywhencertificatesarepurchasedinbulk,butnegotiatingthesepurchasescomeswithsignificanttransactioncostsforbothsides,meaningrenewablegeneratorsareoftenonlywillingtoconsiderdirecttransactionswhenthepurchasevolumeishigh.71CompetitionwithInternationalRenewableEnergyCertificatesManycorporatebuyersofrenewableenergyhaveaggressivetargetsforachievingnet-zeroemissionsthroughthepurchaseofrenewablecertificatesofonekindoranother.BMW,BASF,Sumitomo,andApplehaveallactivelyparticipatedinChina’sgreenpowermarkets.However,companieswithglobaloperationshaveotheroptions,eveniftheyhavesubstantialoperationsinChina.InternationalRenewableEnergyCertificates,orI-RECs,haveexistedforyearsandarecertifiedbyavarietyofthird-partyentities.I-RECsarewidelyavailableinChina,andmanyChinesecompaniespreferI-RECsoverChinesegreencertificatesduetotheirglobalprofileandestablishedhistory.72ChinesecompaniescanalsoissueI-RECsforsaleinternationally,makingtheI-RECadirectcompetitorofthedomesticgreencertificate.Further,I-RECscanbetraded,whichisanimportantattributeformostcompanies,sincebusinessoperationschangeconstantlyandcompaniescanhardlyforecasttheirortheirsupplychains’exactelectricityneeds.However,I-RECsposecertainproblemsintheirownright.UptoJune2021,onlystate-ownedChineseenterprisesinwhichthenationalorprovincialgovernmentownedmorethan50percentofagenerationprojectwereeligibleforI-RECs,whichareavailablefortrading.73SinceJune2021,I-RECregulationshavebeenamendedtoallowprivateChinesecompaniestobeeligibleforI-RECsaswell.7469‘绿证认购平台,’ChinaGreenCertificatePlatform,accessed31May2023,atwww.greenenergy.org.cn.70‘国内绿证为啥少人问津,’ChinaEnergyNews,13December2021,athttps://news.bjx.com.cn/html/20211213/1193224.shtml;‘低碳目标刺激企业购买绿证，但不是买了就行,’GreenEconomy,9July2022,athttps://m.jiemian.com/article/7705107.html.71‘现在可以通过什么方式购买绿证？,’CarbonEmissionsInformationNet,29March2022,atwww.rtans.com/Carbon_emissions/1648521950718.html.72国内绿证为啥少人问津,’ChinaEnergyNews,13December2021,athttps://news.bjx.com.cn/html/20211213/1193224.shtml.73‘阳光视点国内企业如何开展国际绿证交易,’SunshineOverview,8May2020,atwww.sunshinelawfirm.com/newsinfo.aspx?id=2171.74‘掘金国际绿证：新能源企业如何通过I-REC提升公司收益？,’JiaomaEnergy,2September2022,athttps://mp.ofweek.com/ecep/a356714674327.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.15‘Previously,I-RECsdidnotlimitthedomesticsubsidiesthatprojectscouldreceive,meaningChinesestate-ownedenterprisescouldreceiveandsellI-RECsforpowerproducedbyprojectsthatreceivedthesubsidizedfeed-intariffandcouldsellChinesegreencertificatesfortheunsubsidizedportion.AsofJanuary2023,however,I-RECnolongerissuescertificatestocompaniesreceivingdomesticsubsidies.75FollowingtheAugust2023greencertificatepolicy,itappearsthatdomesticgeneratorswillnolongerbepermittedtoissueI-RECs,thoughthereisnothinginthepolicytopreventcompaniesinChinaormultinationalswithChineseoperationsfromusingI-RECstoachieveclimateorrenewableenergygoals.AnotherinternationallytradedgreenenergycertificateistheAPXTIGR,whichisissuedbyaUnitedStates-basedregistry.Currently,theI-RECisfavouredoverAPXTIGRbecauseofitslowerprice.APXTIGRisusuallytradedataroundRMB20–30percertificate,whiletheI-RECistradedataroundRMB2–20.PartofthereasonforitslowerpriceisthatI-RECissuescertificatestohydroprojectswhileAPXTIGRdoesnot,andhydroprojectstendtohavelowerpricing.76Notably,boththeI-RECandAPXTIGRtradeatpricesfarlowerthanChinesegreencertificates,whichtypicallystartataroundRMB50forunsubsidizedwindandsolarprojects.InternationalrecognitionTodate,China’sgreencertificateshavenotachievedwidespreadinternationalrecognition.Currently,greencertificatesaredesignedforChina’sdomesticmarketandtomeetdomesticcleanenergyobjectives.Asalreadymentioned,thegreencertificatepolicyincludeselementsdesignedtohelpprovincescomplywiththeirrenewableobligations,aswellastoprovideadditionalrevenuetorenewableenergyproducers.ManycorporationswithoperationsoutsideofChinamightbeinterestedinvoluntarilypurchasinglow-costgreencertificatesinChinaifthesewereavailable,tocoverelectricityconsumptionbytheiroperationseitherinChinaorglobally.Indeed,thetoppurchasersofgreencertificatesinChinatodatearemainlyinternationalcompanies.Formanysuchcompanies,internationalrecognitionmattersforthecredibilityofenvironmentalclaims.VariousChineseexpertshaveoffereddifferentexplanationsforwhyChinesegreencertificateshaveyettobewidelyaccepted.Thesimplestexplanationislackoftimeandexperience.Althoughthegreencertificatemarketisoverfiveyearsold,thelowpurchasevolumesandthepurposeoftheoriginalgreencertificatetobeasubstituteforthepaymentoffeed-intariffsubsidiesmeanthatonlyrecently,withtheadventofunsubsidizedgreencertificates,hastherebeensignificantmarketinterestinpurchasingChinesegreencertificates.Sincepurchasevolumeshaveonlyincreasedinthelasttwoyears,therearenaturallyonlyafewplayerswithexperienceinthemarket.Forinternationalcompanies,I-RECsarealsoeasiertoexplainanddocumenttocorporatemanagementandinternationalinvestorsorthird-partyESG(environmental,social,andgovernance)verifiers.77GreenpowermarketexpertWangZhixuanhasalsonotedthatthelegalbasisandfunctionsoftheChinesegreencertificateremainvagueandpricinglackstransparencyanduniformity,whichreducesthecertificates’attractivenesscomparedwithI-RECsforlargeinternationalplayers.78Wehaveexaminedtherequirementsofthreemajorthird-partyentities:RE100,EcoVadis,andtheScience-BasedTargetsInitiative(SBTi).Foreach,thereissomeambiguityastowhethertheseorganizationsrecognizeChinesegreencertificates.75‘国际权威绿证签发机构I-REC在中国完成全球首个非国有电站注册合作!,’SohuNews,3August2021,atwww.sohu.com/a/481240473_703050.76‘绿色电力的’身份证’——绿色电力证书认购指南,’WLYEnergy,22August2022,athttps://wly-energy.com/IndustryNews/15.html.77YaoJinnanandJiaKehua,‘绿色电力证书为啥少人问津？[Whydosofewpeoplecareaboutgreencertificates?],’Beijixing,2021,athttps://news.bjx.com.cn/html/20210118/1130286.shtml.78YaoJinnanandJiaKehua,‘绿色电力证书为啥少人问津？[Whydosofewpeoplecareaboutgreencertificates?],’Beijixing,2021,athttps://news.bjx.com.cn/html/20210118/1130286.shtml.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.16‘ChinesegreencertificatesmeetRE100criteriaforredemptionanddouble-counting.79However,RE100statesthattoavoiddouble-countingandtoenablecredibleclaims,RE100canonlyacceptclaimsiftheuseroftheGECfollowstherequirementtoredeemallotherinstruments(forexample,greenhousegas(GHG)offsetsandanyotherenergyattributecertificate(ifissuedforthesamerenewableenergygeneration))inordertoachieveattributeaggregationandclaimrenewableenergyusageinacrediblemanner.80Somethird-partybrokers,suchasEnvision,claimthattheyareabletohelpcustomerssatisfyRE100requirementswiththeirgreencertificatetransactions.EcoVadisrecognizesChinesegreencertificates.AccordingtoJasonYan,aseniorsustainabilityanalystfromEcoVadis,‘EcoVadisrecognisestheChinesegovernmentlaunchingtheGreenElectricityCertificate(GEC)systemasameansforbusinessesandindividualstobuyrenewableenergyvoluntarily.GECiscurrentlyvaluedandcreditedinEcoVadisratingasanevidenceforthe“Purchase(s)and/orgenerationofrenewableenergy”undertheenergyconsumptionandGHGscriteria.’However,EcoVadisevaluatescorporateclaimsacross21indicatorsofcorporatesocialresponsibility,andonlytwo(energyandGHGs,andsupplierenvironmentalperformance)arerelatedtogreencertificaterequirements.SBTirecognizestheuseofenergyattributecertificatesthatadheretotheScope2emissionsstandardsoftheGreenhouseGasProtocol.81TheGreenhouseGasProtocolrecognizesinstrumentsaccordingtoitseightScope2qualitycriteria.82Thesecriteriarequirethataninstrumentmust(1)conveythedirectGHGemissionrateattributeassociatedwiththeunitofelectricityproduced;(2)representanexclusiveinstrumentforGHGemissionratesforelectricity;(3)betracked,redeemed,retired,orcancelledonbehalfofthereportingentity;(4)beissuedandredeemedascloseaspossibletotheperiodofenergyconsumptiontowhichtheinstrumentisapplied;(5)besourcedfromthesamemarketinwhichthereportingentity’selectricity-consumingoperationsarelocatedandtowhichtheinstrumentisapplied;(6)becalculatedbasedondeliveredelectricity,incorporatingcertificatessourcedandretiredonbehalfofitscustomers;(7)ensureallcontractualinstrumentsconveyingemissionsclaimsbetransferredtothereportingentityonly;and(8)provideanadjusted,residualmixcharacterizingtheGHGintensityofunclaimedorpubliclysharedelectricity.ItisunclearwhetherChina’sgreencertificatesmeetallthesecriteria,giventhattheydonotexplicitlyrelatetoGHGemissions,butrathertowindandsolarelectricityproduction.Thepreventionofdouble-countingofenvironmentalattributeswouldbecriticaltoensuringChinagreencertificatesmeettheSBTicriteria.Giventhatinternationalpracticesonrenewableenergycertificationarehardlyuniformandarealwaysundergoingchange,thereisnotauniformbestpracticeorinternationalstandardtocomparewithChina’sgreencertificateorgreenpowerpurchaseagreementmarket.Also,thereisnocleartimelineforadefiniteinternationalstandardtobedeveloped,justasthetimelineforthefutureevolutionofChina’sgreencertificatemarketremainsunclear.InternationalrecognitionofChina’sgreencertificatesisalsoamajorgoalofChinesepolicymakers.TopushmorecompaniesinChinatouseChinesedomesticgreencertificatesratherthanalternatives,theNEAinNovember2022clarifiedthatgreencertificatesarethesoleproofofenvironmentalattributesofrenewableenergyinChina.83TheAugust2023greencertificatepolicycallsformutualrecognitiontobeimproved,andtheNDRCnotesthatRE100recognizesgreencertificatesandtheinfluenceofgreencertificatesamonginternationalcompanies“continuestoexpand,”whilealsobanningChinesegeneratorsfromsellingI-RECsanddisallowingsecondarytradinginChinesegreencertificates.Notably,theAugust2023policycommitsChinatoincreasingtheinternationalrecognitionofChinesegreencertificates,bothbypromotingthemdirectlytocompaniesandthepublic,andby“strengtheningtheresearchandformulationofinternationalstandardsforgreencertificateissuance,measurement,andtransactions,andimprovetheinternationalrecognitionandinfluenceofgreencertificates.”79‘GreenElectricityCertificate(GECs)ofChinaTechnicalAssessmentReport,’RE100,August2020,atwww.there100.org/sites/re100/files/2020-10/Chinese%20GEC%20Paper_RE100_2020%20FINAL.pdf.80‘GreenElectricityCertificate(GECs)ofChinaTechnicalAssessmentReport,’RE100,August2020,atwww.there100.org/sites/re100/files/2020-10/Chinese%20GEC%20Paper_RE100_2020%20FINAL.pdf.81‘SBTiFAQ,’ScienceBasedTargetsInitiative,athttps://sciencebasedtargets.org/faqs#what-are-the-emissions-scopes-which-scopes-do-targets-have-to-cover.82‘GHGProtocolScope2Guidance,’GreenhouseGasProtocol,athttps://ghgprotocol.org/scope-2-guidance.83MiaoFan,‘可再生能源绿色电力证书新解方,’SolarOfWeek,21November2022,athttps://solar.ofweek.com/2022-11/ART-260006-8420-30579757.html.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.17‘EvolutionofgreencertificatesoutsideofChinaandpotentialimpactonChina’smarketJustasChina’sgreencertificateshaveauniquepurposeandorigin—relatingtoChina’sfeed-intariffsubsidydeficit—sotoodoRECsinNorthAmericaandGOs)andRenewableObligationCertificatesinEuropeandtheUnitedKingdom.ThemarketforgreencertificatesemergedfromEuropeinthe1990sasamarket-basedenergypolicythat,atleastintheory,wouldallowthemarkettoprovideadditionalincentivestodevelopandproducerenewableenergyandwoulddeterminethepriceofthissupport.84However,pricesofGOshaveremainedextremelylowandaredominatedbycertainissuingcountriesandgenerationtypes,particularlyhydro.In2020,760TWhweretradedasGOsintheEU,whichcorrespondsto80percentoftheEU’srenewableelectricitygeneration.BasedonAssociationofIssuingBodiesdata,in2019theshareoftechnologiesamongGOissuanceswas54percenthydro,20percentwind,8percentbiomass,8percentfossil,5percentnuclear,4percentsolar,and1percentgeothermal.85ThegeographicmismatchbetweenGObuyersandsellers,andthedominanceofhydro,haslikelylimitedtheextenttowhichGOshavecontributedtothedevelopmentofadditionalrenewablesinEurope.AustriaandtheNetherlandshavetakenthestepofencouragingdomesticpurchaseofGOsto,inturn,encouragemoreinvestmentinlocalrenewableenergytomatchdomesticconsumption.86Moreover,GOpricesintheNetherlandsincreasedafterlargepowerconsumerscommittedtosourcingtheirGOsfromtheNetherlandsonly,indicatingthatincreasedinterestofpowerconsumersinlocalprocurementcanincreasethevalueofGOs.IntheUnitedStates,therenewableportfoliostandardbeganinthelate1990sasawayforstatestomandategradualincreasesinrenewableenergyasashareofthepowermix.Tradingcertificatesforcompliance,aswellasforsaletovoluntarypurchasers,wasstandardizednationallybytheUSEnvironmentalProtectionAgencyinthelate1990s.87Workingwithnon-governmentalorganizationsandeventuallywithprivatecompaniesseekingtoprocurerenewables,theagencyestablishedtheGreenPowerPartnershipandcompletedthefirstvoluntaryRECtransactionin2000.Sincethen,RECtradinghasgonenational,alongwithwidespreaddevelopmentofpowerpurchaseagreementsforcleanenergy.Independentverificationentities,eitherwithindividualstatesorwithregionaltransmissionorganizations,trackandregulatetheissuanceandcancellationofRECsandensurethatenvironmentalattributesarenotdouble-counted,includingacrosspowerpurchaseagreementsandunbundledRECs.WhiletheUnitedStateshasnonationalpolicymandatingacertainlevelofrenewables,windandsolarhavereceivedtaxcreditsforroughlytwodecades;suchsubsidiesexistalongsidevoluntaryandstate-mandatedRECtrading.Aspublicpressureonclimatechangerises,sotoohascorporateinterestinrenewableenergy—alongwithcriticismfromthepublicandnon-governmentalorganizationsofquestionablepracticesandimperfectpolicies.Mediareportssometimesquestionwhethercorporatecommitmentsto100percentcleanenergyarereal,andcompaniesarerespondingbydemandingmorefromgeneratorsandregulatorswhoofferRECsandGOs.InboththeUnitedStatesandEurope,therearemovestosignificantlyreformandalterthewaygreenelectricityistraded:onesuchreformisrelatedtoincreasingthegeographicmatchbetweenelectricityconsumptionandgreenenergypurchased;anotherinvolvestime-matching,sometimesreferredtoas‘24/7time-matching’.Googleisoneprominentcompanyalreadycommittedtospatialandtemporalmatchingofelectricitydemandandgreenenergyprocurement.Scholarshavestartedtorecognizetheimportanceofshiftingawayfrommegawatt-hourstowardspromotionofrenewableenergyproducedattherighttimeandintherightplace.InastudyofgreenpowermarketsinCalifornia,analystsfoundthatprocurementofnewrenewableenergyinthemiddleoftheday,whensolarisplentiful,cancreatedemandfornewpowerimportsandfossilenergytomeet84PoulErikMorthorst,‘Thedevelopmentofagreencertificatemarket.’EnergyPolicy28.15,2000,1085–1094.85YanQin,‘EuropeanGOmarket:overviewandlatesttrend,’presentation,Refinitiv,21June2021.86‘Industrycallsfordomesticguarantees-of-originpowerpolicies’,IndependentCommodityInformationServices,18February2021,atwww.icis.com/explore/resources/news/2021/02/18/10607745/industry-calls-for-domestic-guarantees-of-origin-power-policies.87‘RECquestions&answers,’EnvironmentalTrackingNetworkNorthAmerica,2018,athttps://resource-solutions.org/wp-content/uploads/2018/01/ETNNA-REC-QandA.pdf.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.18‘theeveningramp.88Ensuringcompaniesprocurecleanpower(includingstorage)usinghourlyaccountinghasafarhigherbenefitforreducingcarbonemissionsinsolar-dominatedregionsthanpure100percentrenewableenergytargets.Currently,24/7time-matchedRECsareonlyavailableinonemarketintheMidwest,knownasMISO(theMidcontinentIndependentSystemOperator).TheMidwestRenewableEnergyTrackingSystem(M-RETS),aprivateconsortiuminMISOthatmanagesRECtradingintheregion,introducedhourlytrackingforallRECsregisteredwithitssystemstartingin2019.89InadetailedstudyofhourlyRECtrading,M-RETScitedanumberofadvantages.Time-matchedRECpurchasesprovideanincentiveforinstallationofstorageoramorediversearrayofrenewableenergysourceswithaflatterenergygenerationprofile—oronemorematchedtoload.Load-matchingprovidesvaluableinformationtothemarketandtogridplanners.Further,load-matchingworksinbothdirections,providinganincentivefortheusertoadjustloadduringhourswhenrenewableenergyisscarce.InEuropein2022,theEuropeanNetworkofTransmissionSystemOperators–Electricity(ENTSO-E)publishedaproposaltoimplementaversionof24/7time-matchingalongwithgeographicmatchingofGOs.ENTSO-Esuggestseitherhourlyor15-minutetime-matching,reflectingtheevolutionofEuropeanspotmarketstowardsmoregranulartradingintervalstomorecloselyreflectthefluctuationsinrenewableelectricityoutput.90A2021paperfromEurelectric—supportedbyseveralmajorrenewableenergyproducerssuchasCentrica,Vattenfall,EDF,Endesa,andIberdrola;greenelectricityconsumerssuchasAmazon,Microsoft,andIkea;andtradingexchangeEEX—alsocalledfor24/7time-matchingforcorporaterenewablesourcing.91EnelisoneofthelargestEuropeanenergyprovidersalreadyofferingtime-matchingforrenewables.92Iftime-andspatial-matchingofgreenpowerbecomescommonplaceinEuropeandNorthAmerica,thiscouldcauseanadditionaldisconnectwithChina’spresentgreencertificatesystem.WhileChina’sgreencertificatemarketisnational,Chinalacksanationalelectricityspotmarket.Chinaalsosuffersfrommajortransmissionbottlenecksattheprovincialandregionallevels,especiallybetweenwesternandeasternChinaandatperiodsofpeaksummerdemand.Further,Chinahasstruggledtoimprovetheflexibilityofitspowersystemandhasdeployedvarioussubsidiesandmarketinstrumentstotrytoboosttheflexibilityofbothrenewablesandconventionalpower.Thisincludesestablishingaseparatemarketforpowerplantramping—classifiedinChinaasanancillaryservice—aswellasrequiringenergystorageatnewrenewablefacilitiesorintroducingcapacitypaymentsforflexibilityupgradesatconventionalthermalplants.IfChina’sgreencertificateorgreenpowermarketcontinuestogrowandfulfilsitsobjectiveofraisingnewrevenuesforrenewableelectricityproductionwithoutdifferentiatingbetweentimeorplaceofsupplyversusdemand,thiscouldworsentheproblemsofmeetingpeakdemand,paradoxicallyleadingtofurthercallstoboostcoal-firedpowercapacity.Conclusions:VariousbarriersremainbeforegreencertificatescanplayalargerroleChinahasbecometheworld’sleadingproducerandconsumerofrenewableenergy,includingwindandsolar,butitsrelativelyrecentgreencertificateprogrammehaslaggedbehindthedevelopmentofthecountry’scleanenergysectorandonlyrecentlyseenanuptickinpurchases.Theincreaseininterestingreencertificatesisdirectlytiedtothetransitionofpoliciesawayfrompromotinggreencertificatesmainlyasapathtoreplacegovernmentsubsidiesforexistingprojectssupportedunderthefeed-intariff,andtowardsusinggreencertificatestosupportunsubsidizedprojectsandenergyproductionoutsidetheFIT.88JacquesA.deChalendarandSallyM.Benson,‘Why100%renewableenergyisnotenough,’Joule3,19June2019,athttps://doi.org/10.1016/j.joule.2019.05.002.89BenGerber,‘Apathtosupportingdata-drivenrenewableenergymarkets,’M-RETS(MidwestRenewableEnergyTrackingSystem),March2021,atwww.mrets.org/wp-content/uploads/2021/02/A-Path-to-Supporting-Data-Driven-Renewable-Energy-Markets-March-2021.pdf.90‘Viewsonafuture-proofmarketdesignforguaranteesoforigin,’ENTSO-E,20July2022,atwww.entsoe.eu/2022/07/20/views-on-a-future-proof-market-design-for-guarantees-of-origin.91‘Atimelymatch:Acceleratingpowersystemdecarbonisationbymovingtowards24/7matchingincorporaterenewableelectricity(RES-E)sourcingandmarketintegration,’RE-SourceandEurelectric,October2021,athttps://247res.eurelectric.org/wp-content/uploads/2021/10/FINAL-A-Timely-Match-compressed.cleaned.pdf.92‘Granulartrackingandmatchingofrenewableelectricity—timingisoftheessence,’Enel,October2022,atwww.enelgreenpower.com/content/dam/enel-egp/documenti/offerte/granular-tracking.pdf.Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.19‘Althoughgreencertificateshaveseenhighertradingvolumesandsomeimportantpolicydevelopmentsthatpresagetheirintegrationwithothereffortstoachievecarbonneutrality,thereremainseveralmajorobstaclestoamaturegreencertificatemarketinChina:Greencertificatepurchaseandtradingvolumesremainlowoverallduetovariousfactors,suchasthoselistedbelow.Transparencyinrelationtoregulations,attributes,andpricingremainslow.Compatibilitywithinternationalpracticesisunclear,andChinesegreencertificatesexistalongsideandcompetewithinternationalcertificates.Secondarytradingisnotpermitted.China’sgreencertificatesdonotprovideanincentivefortimeorgeographicalmatchingofloadwithrenewablesupply,whichcouldprovideaperverseincentiveinChina’srenewableenergymarketwhilepotentiallymakingthecertificateslessattractiveforcertainbuyersinterestedinsuchmatching.Lastly,asrenewablesmovefromtheperipherytowardsthecentreofthepowersectorinsideandoutsideChina,thereisthepotentialfornewformsoftimeandgeographicallymatchedgreencertificatestocontributetowardspowersectorflexibility,movingbeyondtheirinitialdesignasapurelysupplementalrevenuesourceforrenewables.China’sgreencertificatemarketiscertaintocontinuetogrow.WhetheritcanplayalargerroleinfacilitatingthetransitiontowardsChina’scleanenergyfuturewilldependontheresolutionofsomeofthemajorbarriersthatstillaffecttheprogrammeandreduceitsattractivenesstopotentialbuyersandsellers.