A Clean Connection

By purchasing Green Electricity Certificates (GECs), the organisers of the seventh China International Import Expo (CIIE) have succeeded in making the once energy-intensive event more environmentally friendly.

A few days before its opening in Shanghai at the beginning of November, the CIIE concluded a deal for 10,000 GECs with the Shanghai branch of China Huadian Corp., a company specialising in electricity, via the green power exchange in Beijing. This purchase enabled the CIIE to acquire 10 million kwh of green electricity (each GEC is equivalent to 1,000 kwh of renewable energy), enough to achieve carbon neutrality and reduce emissions by 4,200 tonnes.

Green certificates serve as a “badge” for electricity from renewable energy sources. They are issued by national authorities to suppliers, usually clean energy companies, who can then sell them on trading platforms. The buyers, often companies that want to reduce their carbon footprint or fulfil their social responsibility obligations, participate in the energy transition by directly supporting the production and consumption of renewable energy in China.

Effective instruments

Since the announcement of China’s dual carbon targets – to peak carbon emissions by 2030 and be carbon neutral by 2060 – in 2020, the development of renewable energy has accelerated dramatically. According to the National Energy Administration (NEA), China added 210 million kw of renewable energy capacity in the first three quarters of 2024, an increase of 21 percent year on year and accounting for 86 percent of new power installations. During this period, electricity generation from renewable energy sources reached 2,510 billion kwh, an increase of 20.9 percent and accounting for around 35.5 percent of total electricity generation. By September 2024, the installed capacity of renewable energy in China reached 1.73 billion kw, an increase of 25 percent year on year.

To support this growth, China has established two trading mechanisms: the GEC market and the green power market. Created in 2017, the GEC market allocates certificates to wind and solar energy producers and allows buyers to support these sources through voluntary purchases. In response to increasing demand from companies looking to reduce their emissions, a special market for green electricity transactions was introduced in 2021. In 2023, GEC transactions were expanded to include hydropower and other clean energy sources.

These markets are powerful tools to support the country’s low-carbon energy transition. As explained by Zhang Xiliang, director of the Research Institute of Energy and Environmental Economics at Tsinghua University, the main difference between the two markets lies in the actual use of the green electricity: in green electricity transactions, buyers receive both the electricity and the certificate, while in the GEC market, they only buy the certificate, thereby certifying their environmental contribution, even if they don’t directly consume green electricity.

New national regulations were introduced last August to standardise medium- and long-term electricity transactions. According to the NEA, a total of 2.31 billion GECs has been issued by the end of September 2024, with 359 million certificates traded nationally, 185 million of which were linked to green electricity transactions.

Companies are the main consumers of green electricity in China. According to the China Electricity Council, they cover a range of sectors, including conventional energy, telecommunications, chemicals, metallurgy and the Internet. Technology giants, companies involved in heavy industries and advanced manufacturers dominate the market. According to a Bloomberg NEF report on China’s green power markets, Alibaba Group, China’s largest green power buyer in 2023, has committed to buying 1,610 gwh of green power for this year. The five largest consumers have increased their consumption of green energy by almost 95 percent compared to the previous year.

A win-win situation

Cooperation between certain provinces and regions rich in renewable energy resources, such as Inner Mongolia Autonomous Region and Xinjiang Uygur Autonomous Region, is increasing. Thanks to green power trading systems, companies can benefit from the supply of clean energy. For example, Bohua, a chemical producer based in Tianjin, purchased 2,064 kwh of green electricity in 2023, which came from Inner Mongolia, a region with abundant wind energy. “This region has built a base for generating wind power for other provinces and cities in the country at a favourable price,” Cheng Hui, deputy director of Bohua’s production technology department, told Tianjin Daily.

In addition to their social responsibility in the fight against climate change, Chinese companies, especially exporters, are increasingly buying green power to remain competitive in the international market. Since the introduction of the Border Carbon Adjustment Mechanism (BCAM) by the European Union (EU) in October 2023, European customers have been demanding a reduced carbon footprint for imported products. In response, Chinese companies are adapting to these new expectations.

Dalian No.1 Instrument Transformer Group, based in Liaoning Province, purchased 1.5 million kwh of green electricity in August 2023 to reduce its emissions to meet the requirements of its European customers. “Thanks to these efforts, our carbon footprint has reduced significantly,” said Xu Dongquan, director of the group’s Environmental Safety Department. In 2023, the company was also awarded the “Green Factory” label at national level.

Against the backdrop of the global energy transition, such as the BCAM and the new EU regulation on batteries and battery waste, experts believe China needs to expand its renewable energy capacity to strengthen its international competitiveness. An advanced green energy market would strengthen China’s international recognition in this field. “On one hand, by buying and utilising green energy, companies can meet the requirements of their international customers for clean energy in production and thus increase their attractiveness and competitiveness in the global market. On the other hand, this choice reflects a company’s commitment to environmental protection and helps to build a positive international brand image and attract consumers and partners who are concerned about climate change,” noted Wu Xiaodi, general manager of Baoshan Iron & Steel, China’s leading steel company.