Guangdong Conducts First Government-Sponsored Auction of Carbon Permits
Yesterday, the Chinese Province of Guangdong conducted its first government-sponsored auction of carbon permits. According to Thompson Reuters Point Carbon, 3 million carbon permits were auctioned for 60 yuan ($9.88) each, with market participants seeking to purchase up to 5 million permits. The auction marks the start of the regional cap and trade program in Guangdong, which will cap emissions from the province's 242 power generation and manufacturing companies at 350 million tons per year.
The auction in Guangdong marks the commencement of the fourth regional cap and trade market in China following the establishment of markets in Beijing, Shanghai, and Shenzen. Beijing's market began trading with an initial auction on November 28th in which carbon permits reportedly sold for $8.20, while Shanghai's first trades were conducted on November 26th with a price of $4.43. Shenzen, China's first market, which launched in June, has reportedly experienced significant price volatility, and permit prices were above those for allowances under the European Union's Emission Trading System after brokers were permitted to enter the market. Thus, it seems that like other carbon markets established before them, the Chinese regional markets will experience a period of volatility as traders and covered parties begin to figure out whether there will be a shortage of carbon permits in any of the regional markets.
In addition to the four markets that commenced trading in 2013, the National Development and Reform Commission has approved carbon trading schemes for Tianjin, Chongquing, and Hubei. China's carbon markets are seen as an important part of its plans to reduce its GHG emissions to 40-45% below 2005 levels by 2020. The launch of China's carbon markets is also potentially significant to the international climate change negotiations, where the Parties to the UN Framework Convention on Climate Change have been deadlocked for years over the relative roles of developed and rapidly industrialized countries in curtailing GHG emissions.
Posted by Margaret E. Peloso
at 12/17/2013 12:00 PM