Huatai Securities: Reassessment of environmental value will unfold along three main lines, focusing on the green fuel sector

Huatai Securities’ research report indicates that the market consensus expects that the NDC (Nationally Determined Contributions) is a long-term concept, green certificate supply is excessive making prices difficult to rise, and green power operators are merely “debt-like” defensive assets. Huatai Securities believes: 1. The countdown to carbon peaking from 2028 to 2030 is only 2-4 years left, and the NDC may become a hard constraint for annual assessments; 2. The transfer of mechanism electricity and mismatched validity periods have led to a shortage of new certificates that can actually be delivered, with the proportion of new certificate trading reaching 84% in February 2026, reversing the supply-demand pattern; 3. The market has not priced in the “growth attributes” of green power operators, and the visibility of green certificate income is expected to drive the valuation center of A/H shares in green power upward. The revaluation of environmental value will unfold along three main lines, benefiting green power operators and high-energy-consuming leading enterprises connected directly to green electricity, with attention to the green fuel sector.

The full text is as follows

Huatai | Public Utilities and Environmental Protection Deep Dive: Looking at Green Power Value Revaluation from Energy Security and Emission Reduction Constraints

Differing from the market: the market consensus expects the NDC to be a long-term concept, green certificate supply is excessive making prices difficult to rise, and green power operators are merely “debt-like” defensive assets (Hong Kong stocks only 0.6-0.9x PB-LF). We believe: 1) The countdown to carbon peaking from 2028 to 2030 is only 2-4 years left, and the NDC may become a hard constraint for annual assessments; 2) The transfer of mechanism electricity and mismatched validity periods have led to a shortage of new certificates that can actually be delivered, with the proportion of new certificate trading reaching 84% in February 2026, reversing the supply-demand pattern; 3) The market has not priced in the “growth attributes” of green power operators, and the visibility of green certificate income is expected to drive the valuation center of A/H shares in green power upward. We believe the revaluation of environmental value will unfold along three main lines, benefiting green power operators and high-energy-consuming leading enterprises connected directly to green electricity, with attention to the green fuel sector.

Core viewpoints

With the hard constraints of the NDC (Nationally Determined Contributions) coming into effect in 2035, China’s climate action is shifting from “intensity control” to “total reduction,” entering a new era of environmental value pricing. According to our calculations, the reversal of the supply-demand pattern will push the price center of green certificates to more than double the current level, significantly increasing the electricity revenue and project returns of green power operators, driving the reconstruction of the sector’s valuation system, while also bringing new opportunities for the transformation of high-energy-consuming industries and carbon service-related sectors. Recommendations: 1) Undervalued Hong Kong green power operators that will fully benefit from profit enhancement and valuation recovery under the electricity-certificate-carbon linkage; 2) Leading high-energy-consuming enterprises with integrated green power capabilities that can effectively avoid carbon cost erosion and export compliance risks; 3) Green fuels benefiting from the upgrade of international supply chain carbon barriers and domestic renewable energy substitution demand, with strong policy support and resource barrier moats.

The hard constraint of the NDC anchors the carbon peaking node, and the bottom line of green power demand in 2035 is clear.

We convert the 2035 NDC target into quantifiable short-term constraints, estimating that domestic carbon emissions will peak between 2028 and 2030, corresponding to a non-fossil energy consumption ratio of no less than 30% by 2035. Based on electricity calculations, the green power demand in 2035 will be no less than 6.59 trillion kWh, with an average annual increase of 415 million kilowatts in wind and solar installations from 2026 to 2035, significantly higher than the average of 261 million kilowatts during the “14th Five-Year Plan.” Six major high-energy-consuming industries and data centers face clear mandatory green power consumption ratio requirements, forming the core support for green certificate demand. We expect the demand for green certificates to soar to 3-3.3 billion by 2030, with clear growth in demand.

Policy reshapes the supply-demand structure of green certificates, and the scarcity of tradable green certificates continues to be highlighted.

We believe that policy has reshaped the supply-demand structure: Document 136 of 2025 clearly states that the mechanism electricity corresponding to green certificates transferred to provincial accounts will no longer generate repeat revenue, leading to a contraction in the supply of tradable green certificates; combined with a 2-year validity period constraint, the price of near-term green certificates (produced in 2024) fell to 1.21 yuan each in February 2026, while the price of new certificates (produced in 2025) rose to 5.90 yuan each, with a premium of 380% between old and new certificates. Document 262 includes six major high-energy-consuming industries and data centers in mandatory consumption assessments, shifting green certificate demand from voluntary consumption to rigid assessment, and the tradable rate will concentrate from the current 64.2% towards quality projects.

The electricity-certificate-carbon coordination mechanism takes shape, and the rising carbon price drives the revaluation of green certificates.

The link between domestic carbon prices and green certificate prices strengthens. We estimate that for every 10 yuan/ton increase in carbon prices, the theoretical value of green certificates increases by 1.5-2.0 yuan each. With the expansion of the national carbon market to key industries such as steel, cement, and aluminum smelting, the coverage of emissions will significantly increase. We expect carbon prices to rise to 100 yuan/ton by 2027-2028, corresponding to a theoretical value of green certificates of 12-15 yuan each, representing an increase of 103%-154% compared to the price in February 2026. The visibility of green certificate income will drive the environmental value of renewable energy from “implicit subsidies” to “explicit pricing,” opening up the space for revaluation in the green power sector.

Differences from market views

The market consensus expects that the NDC is a long-term concept, green certificate supply is excessive making prices difficult to rise, and green power operators are merely “debt-like” defensive assets (Hong Kong stocks only 0.6-0.9x PB-LF). We believe: 1) The countdown to carbon peaking from 2028 to 2030 is only 2-4 years left, and the NDC may become a hard constraint for annual assessments; 2) The transfer of mechanism electricity and mismatched validity periods have led to a shortage of new certificates that can actually be delivered, with the proportion of new certificate trading reaching 84% in February 2026, reversing the supply-demand pattern; 3) The market has not priced in the “growth attributes” of green power operators, and the visibility of green certificate income is expected to drive the valuation center of A/H shares in green power upward.

Benefits for green power operators and high-energy-consuming leading enterprises connected directly to green electricity

We believe the revaluation of environmental value will unfold along three main lines: 1) Benefiting from profit enhancement and valuation system switching under the electricity-certificate-carbon linkage; 2) Leading high-energy-consuming enterprises with integrated green power capabilities, where the self-sufficiency rate of green power will become a core competitiveness, locking in low-cost green power to avoid carbon cost erosion and CBAM export compliance risks; 3) High expectation differential tracks bound by total reduction policies, paying attention to the green fuel sector.

Risk warnings: Policy advancement may fall short of expectations; risks of declining green electricity prices; risks of carbon price fluctuations; risks of technological substitution in renewable energy.

(Source: Interface News)