China’s Flat-lining Carbon Market May Get Lift From New Permits

Participants in China’s carbon market expect 5 billion tons of emissions allowances to be issued around October, a move that will help kick-start what has so far been moribund trading.

The allowances are expected to bring China’s total carbon issuance to about 8 billion tons and stimulate more active trading, according to three market participants, who asked not to be identified as they aren’t authorized to speak publicly.

Companies in the power sector, the first industry to be included in the carbon market, have been limiting activity since the July launch while they wait for additional quotas for the remaining 30% of 2019 emissions, and 100% of 2020’s emission allowances, the people said. China’s carbon market is set up so that firms trade pollution that has already been emitted the previous year due to the challenges in forecasting future releases.

The Ministry of Ecology and Environment, which oversees the national market hosted by the Shanghai Environment and Energy Exchange, didn’t respond to calls seeking comments.

Trading volume in China’s carbon market has steadily dwindled since its July 16 launch, and fell to a record low Tuesday of just 23 tons, according to data from the Shanghai exchange. Participation has so far been limited to power generators by authorities who have yet to allow derivatives or wider financial markets to join.

China carbon allowances closed up 0.4% to 45.35 yuan ($7.02) per metric ton on Tuesday, according to data from the National Carbon Emission Trading Agency. Prices are a fraction of the rate in the European Union, where carbon rose above 60 euros ($70.83) for the first time on record on Thursday.

— With assistance by John Liu, Qian Chen, and Luz Ding – Bloomberg – Green

 

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