China’s Forest-Carbon Revision Lowers the Haircut and Lengthens the Duty

China has rewritten the rules for bringing afforestation and mangrove projects into its national voluntary carbon market. The Ministry of Ecology and Environment posted both V02 methodologies on 10 October; the afforestation notice is dated 9 October and the mangrove notice 8 October. Each takes effect 30 days after issuance, while projects registered under V01 before then remain on the old method. ^{[1] [4]}

The change is not simply an expansion of eligible carbon supply. The afforestation method lowers the default non-permanence deduction from V01’s 10% to 6%, but requires the project lifetime to continue for at least ten years after the crediting period. It also broadens a conditional route to exemption from a project-specific additionality test and gives owners clearer rules for transferring the right to the emission reductions. ^{[1] [2] [3]}

The haircut falls, but duration becomes explicit

Under V02, an afforestation project can choose a crediting period of 20 to 40 years. Its project lifetime must then extend at least another ten years. The method deducts 6% from calculated removals for the risk that fire, pests, illegal damage or other causes release stored carbon. It says the rate is based on an analysis of roughly 4.98% combined historical losses and affected forest area, rounded upward on a conservative basis. ^[2]

The 2023 V01 method already applied a non-permanence deduction. It cited a roughly 4.98% annual average disaster-loss rate for 1999–2018 and set the default at 10%. It used the same 20-to-40-year crediting range, while requiring project life to fit within the valid term of the relevant land or forest rights. V02 therefore mixes a smaller quantitative haircut with a longer explicit obligation: all else equal, 94% rather than 90% remains after this single risk factor, but the project must continue beyond the earning period. ^{[3] [2]}

This is not a guarantee that 94% of every project’s measured removal will be issued, and the two versions should not be used to forecast supply by changing one percentage alone. Other eligibility, monitoring, verification and calculation rules also changed or still apply. Nor does a uniform 6% deduction prove that every forest faces the same physical risk. It is a methodology-level accounting rule, not a site-specific prediction.

Ownership becomes part of carbon integrity

The implementing notice says emission reductions belong to the owner of the trees. If the project developer is not that owner, it must submit proof of ownership and a transfer agreement. The developer must also obtain the owner’s commitment that the trees will not be clear-cut during the project lifetime. Provincial and municipal ecology and forestry authorities are assigned post-registration supervision and enforcement roles. ^[1]

That makes title and contract duration more than administrative paperwork. They are part of the evidence that a credit represents a removal the project can maintain. A buyer or financier should therefore check who owns the trees, who owns the credit, whether the transfer covers the full project life and what happens if land-use or operating rights change. A registry entry cannot cure a weak underlying chain of rights.

V02 also adds a fourth category within its conditional exemption from a full additionality demonstration: an afforestation project whose trees do not reach their main harvest age during the crediting period. The exemption’s general premise is that a project serves ecological or public purposes, has high establishment and maintenance costs, has difficulty earning income other than carbon-credit revenue and lacks financial attractiveness. The earlier method listed three qualifying categories—projects in areas with annual precipitation of no more than 400 millimetres, projects in national key ecological-function zones and public-welfare forests. The new fourth category may lower development friction for some long-rotation projects, but it is not an automatic exemption for every slow-growing forest and does not remove other eligibility or verification conditions. ^{[2] [3]}

Aggregation may lower coastal project costs

The parallel mangrove notice takes a different route to scale. Multiple qualifying mangrove, coastal salt-marsh restoration and seagrass restoration activities in the same provincial-level jurisdiction may be combined into one registration application. The owner of the combined project must obtain authorisation from every underlying owner and calculate the reductions from the three activity types separately. If any included owner loses ownership or use rights over the relevant sea area or land, the combined project’s crediting period ends. ^[4]

Aggregation can spread validation, monitoring and registration costs across small sites. It also creates a shared dependency: one broken rights chain can affect the combined project. Contracts will need to deal with authorisation, data access, monitoring duties, revenue allocation and early loss of tenure before a developer treats aggregation as a simple economy of scale.

What the market should test next

For project developers, the immediate work is a version and rights audit. Identify which projects are already registered under V01, which will enter under V02, and whether ownership documents and transfer agreements last through the required project life. Re-run supply estimates with the applicable version’s risk deduction and do not present gross sequestration as expected issued credits.

For credit buyers, the revision improves the questions available for due diligence but does not answer them automatically. Ask which methodology version applies, how project boundaries were established, which carbon pools were selected, who controls the underlying trees or coastal land, and how reversal or tenure events are monitored. For aggregated coastal projects, test every included owner rather than reviewing only the lead developer.

The revised methods could make nature-based CCER projects easier to organise and leave more calculated afforestation removals after the default risk deduction, while making duration and ownership obligations more explicit. Whether they increase credible supply will depend on project-level evidence, registration decisions and continuing supervision. The important signal is narrower: China is recalibrating both project economics and carbon-integrity controls, not moving every rule in a single direction.