China Carbon Watch: Market Gets Off to a Typically Sleepy Start for the Year

Activity was muted in China’s national carbon emissions allowance (CEA) market for the January-March quarter, typical for the first quarter of the year, following a compliance submission deadline on the last day of the year before. The eight-day Lunar New Year holidays in the quarter also meant an extended period of market closure.

Total quarterly volume of 6.46 million tons was lower than, but broadly similar to, the previous two comparable periods — the first quarters of 2022 and 2024. Block trades accounted for 69% of the total volume, much lower than the all-time average of 83%. Among the allowance vintages, the 2023 vintage dominated trading, accounting for 85.6% of the total volume; the 2022 vintage accounted for 6.5%, and the 2021 and 2019-2020 vintages combined made up the remaining 7.9%.

China’s Carbon Prices Retreat

On the policy front, the Ministry of Ecology and Environment, the CEA market regulator, on March 26 unveiled the Work Plan for Including the Iron and Steel, Cement, and Aluminum Smelting Sectors in the National CEA Market, formally moving forward with the much-anticipated inclusion of the three carbon-intense industrial sectors in the national emissions trading scheme (ETS). The Chinese ETS now covers about 8.2 billion tons of carbon emissions annually, equivalent to over 60% of China’s total annual emissions or about 14% of the global total.