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

The Huatai Securities research report indicates that the market consensus expects NDC (Nationally Determined Contributions) to be a long-term concept, with oversupply of green certificates making it difficult for prices to rise, and green power operators to merely be “debt-like” defensive assets. Huatai Securities believes: 1. The countdown to carbon peak from 2028 to 2030 leaves only 2-4 years, and NDC may become a hard constraint for annual assessments; 2. The transfer of mechanism electricity and mismatches in validity periods have led to a shortage of actual deliverable new certificates; as of February 2026, the proportion of new certificate trading has reached 84%, reversing the supply-demand pattern; 3. The market has not priced the “growth attributes” of green power operators, making green certificate returns more visible, which is expected to drive the valuation center of A/H shares in green power upwards. The re-evaluation of environmental value will unfold along three main lines, benefiting green power operators and high-energy-consuming leading companies directly connected to green power, with a focus on the green fuel sector.

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

In contrast to the market: the market consensus expects NDC to be a long-term concept, with oversupply of green certificates making it difficult for prices to rise, and green power operators to merely be “debt-like” defensive assets (Hong Kong stocks only 0.6-0.9x PB-LF). We believe: 1) The countdown to carbon peak from 2028-2030 leaves only 2-4 years, and NDC may become a hard constraint for annual assessments; 2) The transfer of mechanism electricity and mismatches in validity periods have led to a shortage of actual deliverable new certificates; as of February 2026, the proportion of new certificate trading has reached 84%, reversing the supply-demand pattern; 3) The market has not priced the “growth attributes” of green power operators, making green certificate returns more visible, which is expected to drive the valuation center of A/H shares in green power upwards. We believe the re-evaluation of environmental value will unfold along three main lines, benefiting green power operators and high-energy-consuming leading companies directly connected to green power, with a focus on the green fuel sector.

Core Views

As the hard constraints of NDC (Nationally Determined Contributions) are implemented by 2035, China’s climate action shifts from “intensity control” to “total emission reduction,” and the pricing of environmental value enters a new era. According to our estimates, the reversal in supply-demand pattern will push the central price of green certificates to more than double its current level, significantly enhancing the revenue per kilowatt-hour and project returns for green power operators, driving a 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, which will fully benefit from profit enhancement and valuation recovery under the linkage of electricity-certificates-carbon; 2) Leading high-energy-consuming companies with integrated green power capabilities can effectively avoid the erosion of carbon costs and export compliance risks; 3) Green fuels benefit from the upgrading of international supply chain carbon barriers and domestic renewable energy substitution demand, possessing policy rigidity and resource barrier moats.

NDC hard constraints anchor the carbon peak node, with a clear bottom line for green power demand by 2035

We convert the 2035 NDC targets into quantifiable short-term constraints. We estimate 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 reverse calculations from electricity, the green power demand in 2035 will be no less than 6.59 trillion kilowatt-hours, with an average annual increase in wind and solar installations of 415 million kilowatts 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 hard requirements for green power consumption ratios, 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 a clear growth in demand.

Policy reshapes the supply-demand pattern of green certificates, with the scarcity of tradable green certificates continuing to stand out

We believe that policies have reshaped the supply-demand structure: Document No. 136 of 2025 clearly states that the mechanism electricity corresponding to green certificates will no longer generate repeated revenue when transferred to provincial accounts, leading to a contraction in the supply of tradable green certificates; coupled with the two-year validity constraints, 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) rebounded to 5.90 yuan each, with a premium of 380% between old and new certificates. Document No. 262 includes six major high-energy-consuming industries and data centers into mandatory consumption assessments, shifting green certificate demand from voluntary consumption to rigid assessments, with the tradable rate expected to concentrate from the current 64.2% towards high-quality projects.

The electricity-certificates-carbon collaborative mechanism has formed, with rising carbon prices driving the re-evaluation of green certificate value

The linkage between domestic carbon prices and green certificate prices has strengthened. 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. As the national carbon market expands 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 February 2026 price. The visibility of green certificate returns will shift the environmental value of renewable energy from “implicit subsidies” to “explicit pricing,” opening up the value re-evaluation space for the green power sector.

Differences from market views

The market consensus expects NDC to be a long-term concept, with oversupply of green certificates making it difficult for prices to rise, and green power operators to merely be “debt-like” defensive assets (Hong Kong stocks only 0.6-0.9x PB-LF). We believe: 1) The countdown to carbon peak from 2028-2030 leaves only 2-4 years, and NDC may become a hard constraint for annual assessments; 2) The transfer of mechanism electricity and mismatches in validity periods have led to a shortage of actual deliverable new certificates; as of February 2026, the proportion of new certificate trading has reached 84%, reversing the supply-demand pattern; 3) The market has not priced the “growth attributes” of green power operators, making green certificate returns more visible, which is expected to drive the valuation center of A/H shares in green power upwards.

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

We believe the re-evaluation of environmental value will unfold along three main lines: 1) Benefiting from profit enhancement and valuation system switching under the linkage of electricity-certificates-carbon; 2) Leading high-energy-consuming companies with integrated green power capabilities, where self-sufficiency in green power will become a core competitive advantage, locking in low-cost green power to avoid erosion of carbon costs and CBAM export compliance risks; 3) High-expectation difference tracks under binding total emission reduction policies, with a focus on the green fuel sector.

Risk warnings: Policy advancement may not meet expectations; risks of declining green power electricity prices; risks of carbon price fluctuations; risks of technology substitution in renewable energy.

(Source: Interface News)