China Green Electricity Certificates Enter Compliance as SBTi Legitimizes EACs — June 2026
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June brought significant regulatory movement across carbon, renewable energy, and clean fuels markets. The SBTi's Corporate Net-Zero Standard V2.0 is the headline. The updated Standard continues to emphasize direct mitigation efforts within a company’s physical emissions boundary, while affording greater flexibility to use high-integrity market-based instruments, including EACs, within a tiered implementation hierarchy. That shift has implications for increased, incremental demand across renewable gas, biofuels, and environmental attribute certificates. In China, the national renewable energy consumption quota that takes effect August 1, 2026, moves GEC procurement from voluntary to compliance-driven for key energy-consuming sectors. The procurement timelines are short; the consequences for non-compliance are real. Companies with operations in affected sectors should wish to review their positions. In the US, the updated 45Z GREET model from the DOE removes a long-standing uncertainty for biofuel producers, and the Washington-California-Quebec market linkage agreement moves closer to legislative ratification.
Valid as of 29 June 2026.
Global
SBTi Corporate Net-Zero Standard V2.0: Market-Based Instruments Now Recognized in Corporate Climate Targets
What happened
The Science Based Targets Initiative released the final version of its Corporate Net-Zero Standard V2.0. The update introduces separate targets for Scope 1/2/3 emissions, a mandatory 5-year cycle with transition plans, and an implementation hierarchy that prioritizes direct decarbonization before market instruments may be used. The update introduces tailored decarbonization pathways and a defined implementation hierarchy designed to reflect the operating realities of businesses across different sectors, geographies, and stages of decarbonization.
A key change from V1.0 is the Standard's formal recognition of high-integrity market-based instruments, including environmental attribute certificates (EACs) and book-and-claim systems, with appropriate guardrails, as legitimate tools for addressing emissions where direct abatement options remain constrained. Scope 2 market instruments must meet requirements for deliverability region and come from generation assets <15 years old and within a 12-month matching period. The exact requirements for hourly-matched, in-region electricity EACs are dependent on the pending Scope 2 Standard from the Greenhouse Gas Protocol (GHGP). The Standard also introduces an expectation that the largest companies address a defined portion of their ongoing residual emissions through carbon credits. Mandatory adoption of V2.0 takes effect in 2028, with voluntary early adoption available from 2026.
What it means for your business
Companies with committed or in-progress targets can review now whether their current procurement strategies align with the V2.0 hierarchy ahead of the 2028 mandatory transition. Companies with existing V1 targets may retain them through their current cycle and adopt select V2 innovations without full re-validation. Large electricity uses >10GWh/market must begin tracking and reporting hourly consumption performance.
Companies holding or planning SBTi-aligned climate targets now have a pathway to use EACs and book-and-claim instruments within a recognized framework, providing greater procurement certainty across renewable gas, biofuels, and other environmental commodities. For companies in high-emitting sectors where direct abatement is slow or capital-constrained, the Standard creates a clearer and more defensible case for market-based procurement. The deliverability requirements will create premiums for voluntary RECs produced in high-demand regions. Separate S1 and S2 targets will increase incremental demand for certificates used to address Scope 1 emissions.
The new carbon credit expectation for the largest corporates creates a medium-to-long-term demand signal for compliance-grade and high-integrity voluntary carbon instruments.
Entry into force
Global. Early adoption voluntary from 2026; mandatory adoption from 2028.
Further reading
Asia-Pacific
China Renewable Energy Consumption Quota 2026: GEC Compliance Obligation Takes Effect August 1
What happened
Built on China's energy law, the National Development and Reform Commission established a national renewable energy consumption quota with binding legal force, effective August 1, 2026. The mandate sets minimum consumption targets for both renewable electricity and non-electric renewable energy sources, enforced at provincial level and across key energy-consuming sectors. For renewable electricity, Green Electricity Certificates (GECs) serve as the sole accounting instrument for obligated companies. Sectors explicitly covered include electrolytic aluminum, steel, cement, polysilicon, and data centers. Annual assessment and public transparency reporting are required. The non-electric renewable energy component, covering green fuels, bioheat, biomethane, and other bioenergy, is included in the mandate framework, with formal assessment expected to begin when implementation guidance is finalized.
What it means for your business
The mandate converts GEC procurement from a voluntary sustainability signal into a compliance obligation for obligated sectors. Binding annual assessments and consequences for non-compliance create time-sensitive procurement pressure for companies operating in aluminum, steel, cement, polysilicon, and data centers in China. GECs must be issued and retired within the same calendar year to qualify for compliance, which limits retroactive procurement and requires forward planning. The non-electric renewable energy component signals a formal national accounting framework for bioenergy consumption in China, including biomethane, where none previously existed at this scale. Companies with energy-intensive operations in China, or supply chains that include these sectors, should assess their GEC procurement positions against the August 1, 2026, effective date.
Entry into force
China. August 1, 2026. Annual assessment requirements apply from the first compliance period.
Further reading
China GEC Accounting Rules 2026: Green Electricity Certificates Confirmed as Sole Compliance Instrument
What happened
China released trial guidelines for renewable electricity consumption accounting across three levels: provinces, municipalities, and corporate electricity users. The guidelines require annual reporting to higher-level governing bodies as part of mandatory performance assessments. The core accounting principle is the elimination of double-counting across reporting levels. For corporate users subject to the mandate, GECs are confirmed as the only instrument eligible to serve as proof of renewable electricity consumption. A same-year match requirement applies: GECs must be issued and retired within the same calendar year in which the electricity is consumed to qualify.
What it means for your business
The trial guidelines cement GECs as the compliance instrument of record for renewable electricity in China, removing any ambiguity about the role of other instruments. The same-year match rule creates a structurally tighter procurement timeline, reducing the window for retroactive or secondary-market GEC purchases by obligated companies. Corporate users in sectors covered by the national quota, particularly data centers, manufacturing clusters, aluminum, and steel, should review whether their existing procurement arrangements meet the new annual matching requirements. The guidelines also create demand for higher-specificity GEC products with clear issuance and retirement traceability.
Entry into force
China. Trial guidelines published June 2026; annual reporting requirements apply immediately for obligated parties.
Further reading
North America
Washington-California-Quebec Carbon Market Linkage: Three Jurisdictions Sign Formal Agreement
What happened
The governments of California, Quebec, and Washington state signed a formal agreement to begin the process of linking their respective carbon markets. Washington state's cap-and-invest program, established under the Climate Commitment Act, would join the existing California-Quebec Western Climate Initiative (WCI) linked market. The agreement now moves to state and provincial legislatures for ratification, with completion expected in 2027.
What it means for your business
A linked three-jurisdiction carbon market would represent a material expansion of the WCI's liquidity and geographic scope. Companies with compliance obligations under any of the three programs, or with procurement positions in WCI allowances, may wish to review how linkage affects their compliance planning and allowance portfolio. Ratification timelines are subject to legislative processes in all three jurisdictions; the expected 2027 completion is not guaranteed. Companies with operations in Washington state that are covered by the Climate Commitment Act should review their compliance obligation continuity through the linkage transition.
Entry into force
United States / Canada. Agreement signed June 2026; legislative ratification and full linkage expected 2027.
Further reading
45Z Clean Fuel Tax Credit: DOE Releases Updated GREET Model for 2026 Claims
What happened
The US Department of Energy released its long-awaited updated 45ZCF-GREET model for 2026, together with an accompanying user manual and a full log of changes. The update implements two key changes: the removal of indirect land use change (ILUC) from the carbon intensity calculation methodology, and a restriction on feedstock eligibility to materials sourced from the US, Canada, and Mexico. The updated model is required for renewable fuel producers to calculate and claim the 45Z Clean Fuel Production tax credit for 2026 production.
What it means for your business
Renewable fuel producers who have been waiting on the GREET model update to finalize their 45Z compliance positions can now proceed. The elimination of ILUC reduces the carbon intensity penalty for certain feedstocks, which may improve the economics of 45Z credit claims for affected producers. The North American feedstock restriction has direct implications for international supply chains: feedstocks originating outside the US, Canada, and Mexico are no longer eligible, which requires producers to assess and potentially restructure their procurement. The model release provides the regulatory certainty that renewable fuel producers have needed to commit to long-term procurement decisions.
Entry into force
United States. Model effective for 2026 production year tax credit claims.
Further reading
Disclaimer
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