China Carbon Watch: Trading Volume Hits Record Low in August

Carbon market update (July-August)

Trading volume of China’s national carbon emissions allowance (CEA) market hit an all-time monthly low of 547,987 tons in August, around half the 1.09 million tons recorded in July.

The combined volume for July and August was the lowest of any two-month period since the launch of the CEA market in July 2021.

The August volume by block trades was also a record monthly low at 351,335 tons.

Factors holding back the market since February have not abated, including a lack of policy direction on the further development of the market and a slowing economy. As a result, it is not surprising that market participants, such as power generators, have had little incentive to trade before the next compliance period begins in likely over a year’s time.

Market prices, on the other hand, continued to hold up well amid record low volumes, with open market transactions closing July at 58 yuan ($8.34) per ton, up 0.9% from June. Open market transactions closed at the same price in August.

The July monthly volume-weighted average price for all trades was 58.82 yuan per ton, a 1.7% increase from June and all-time monthly high. The August volume-weighted average price, on the other hand, dropped 4.6% from July to 56.1 yuan per ton. This was due to unexpectedly low prices for some block trades.

Carbon news

• In a notification posted on July 14, China’s State Council, the country’s cabinet, listed the enactment of the Interim Regulation for the Management of Carbon Emissions Trading (碳排放权交易管理暂行条例) as a priority in its 2022 annual legislative plan.

The regulation was also on the 2021 priority list but did not materialize then.

If enacted, the regulation will provide the CEA market with a stronger legal foundation for future development, including greater penalties for noncompliance.

• According to a notification released on Aug. 19, the National Development and Reform Commission, the National Bureau of Statistics, and the Ministry of Ecology and Environment have jointly issued the Implementation Plan for Accelerating the Establishment of a Unified and Standardized Carbon Emissions Accounting and Verification Framework (关于加快建立统一规范的碳排放统计核算体系实施方案).

The plan aims to establish a standardized carbon emissions quantification and verification system that can be applied from the enterprise level all the way to the national greenhouse gases inventory. Such a system will have a far-reaching impact on China’s efforts to achieve its carbon neutrality goals through its CEA market, as well as voluntary carbon reduction actions by enterprises.

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 Jonathan Breen (jonathanbreen@caixin.com)

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