China Carbon Watch (June): Allowance Trading Volume Nears All-Time Low

Market update

Trading in China’s national carbon emissions allowance (CEA) market ended June with a total monthly volume of 770,290 tons, near the all-time monthly low set in March.

Open market transactions hit an all-time monthly low of 290 tons. Block trades occurred on five of the 21 trading days, but accounted for nearly all of the volume for the month.

The main factors for this low activity, according to some market observers, were a lack of regulatory clarity on the CEA market’s expansion to include more emission sources or allow additional market participants, lower market participation resulting from Covid-19 restrictions, and anticipated lower CEA demand due to the general economic environment.

Market prices, on the other hand, continued to hold up well amid extremely low volumes, with open market transactions closing in June at 57.5 yuan ($8.58) per ton, having dropped only 2.5% from a month earlier. June’s monthly volume-weighted average price for all trades was 57.86 yuan per ton, up 1.8% from May.

Carbon news

In a notice to provincial-level environmental agencies dated June 7, the Ministry of Ecology and Environment, citing the impact of the pandemic, extended the deadline for agencies to verify key power-generation companies’ 2021 emissions from June 30 to Sept. 30.

The notice also instructed some power generators to use a lower default carbon content of thermal coal, effectively lowering the calculated emissions from coal combustion. A lower emissions value means fewer CEAs are needed, leading to lower demand for CEAs from these entities.

Bai Bo is executive chairman and co-founder of the Singapore-based MetaVerse Green Exchange.

The analysis and opinions expressed in third-party articles are those of the authors and do not necessarily reflect the positions of Caixin.

Contact editor Michael Bellart (michaelbellart@caixin.com)

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