Cathay Pacific Haitong: The green certification system is moving from voluntary consumption to a rigid restraint on demand growth, and the certainty is gradually increasing

The Zhitong Finance App learned that Cathay Pacific Haitong Securities released a research report saying that the Green Certificate is changing from a voluntarily purchased environmental rights certificate to a compliance tool that can be monitored, accounted for, and assessed in key energy industries. The bank expects that after 28 years, the green certificate market will gradually move from obvious easing to a tight balance. If the industry continues to expand or if the proportion of green electricity consumption in key industries increases and accelerates, the inflection point of the industry may arrive early.

Cathay Pacific Haitong's main views are as follows:

The green certification system has moved from voluntary consumption to rigid restrictions, and the certainty of demand growth is gradually increasing. Since 2017, China's green certification system has successively gone through stages such as voluntary subscription, green power transactions, full issuance coverage, and compulsory consumption mechanism construction. Order No. 42, which came into effect in 2026, further clarified that the lowest share of renewable energy electricity consumption in key energy use industries corresponds to the green certificate accounting for electricity production in the assessment year, and enterprises that have not completed the target will need to make a replacement purchase. The green certificate was gradually transformed from a brand and carbon reduction tool chosen by enterprises to a basic certificate for key industries to fulfill their responsibility for green electricity consumption.

The core of supply analysis is not the total amount issued, but the effective supply of independent green certificates. The amount of green certification issued in 2024 includes a large number of historical electricity reissues, which does not represent a normalized annual supply. In 2025, 2,947 million green certificates were issued nationwide, of which 1,893 million green certificates can be traded. After further deducting 250 million green certificates transferred along with green power transactions, the effective supply of independent green certificates was about 1,640 billion. Considering the increase in issuance of new landscape projects, as well as the impact of mechanical electricity, untradable green certificates, and continued growth in green power transactions, the effective supply of independent green certificates is expected to reach a phased high of about 1.98 billion in 2029, and fall slightly to 1.96 billion in 2030.

The forced expansion of the consumer sector constituted the main driving force for demand growth. Currently, demand for green certificates mainly comes from key energy use industries, provincial consumption liability gaps, and voluntary consumption and export supply chains. Based on the estimated electricity consumption and green electricity consumption ratio of electrolytic aluminum, steel, cement, polysilicon and data centers, the demand for independent green certificates from 2026 to 2030 is estimated to be 9.1, 11.4, 13.6, 15.5, and 1.77 billion, respectively. Among them, demand growth from 2026 to 2027 was mainly driven by key industry assessments and scope expansion, and after 2028, it was mainly due to the continuous increase in the proportion of green electricity consumption.

Under the benchmark scenario, supply and demand gradually converge, and 2029-2030 may enter a price elasticity release window. The ratio between demand for independent green certificates and effective supply is expected to increase from 0.41 in 2025 to 0.70 in 2028 and 0.90 in 2030, and the market will gradually move from obvious easing to a tight balance. If the proportion of green electricity consumption in key industries increases by 5 percentage points each year, the supply-demand ratio will reach 0.98 in 2030; if it is increased by 8 percentage points every year, the supply-demand ratio will rise to 1.07 in 2030. The market may be in short supply and demand, and the momentum for rising green certificate prices will increase significantly.

Further expansion of the industry could be a key catalyst for an early rise in prices. The current model does not include potential new industries such as flat glass, oil refining, ethylene, synthetic ammonia, methanol, other non-ferrous metals, lithium-ion batteries, 5G base stations, and charging infrastructure. If the above industries are gradually included in the green electricity consumption assessment, demand growth may be significantly faster than the benchmark forecast, driving the inflection point of supply and demand ahead of schedule.

Risk warning: The expansion of key industries and the increase in the consumption ratio of green electricity fell short of expectations; the supply of new energy installations and tradable green certificates exceeded expectations; green certification, green electricity and carbon accounting policies changed.