Guangdong to Adopt Flexible Mechanism for Carbon Market Pricing

Guangdong to Adopt Flexible Mechanism for Carbon Market PricingOne of the country’s biggest carbon market is planning to adopt a more flexible mechanism for pricing that the hope will attract more participants for it permit auctions. Guangdong is the only one of the seven pilot carbon markets in China that place a small number of carbon permits on sale using regular auctions.

97 percent of emissions permits are allocated to provincial companies for free, although the rest are bought in the market or through auctions based on a move that is aimed on placing a price on CO2 emissions. But 10 percent of the offered volume sold in the last auction in June since minimum prices that is set by the government is higher than the price of permits that are traded in the market. Based on the new system that took effect in the auction in 2015 later this month, a benchmark price will be set by authorities that are valued at 80 percent of the weighted average market prices three months prior to the auction.

Guangdong is permitting trade around 13 to 19 yuan for each of the last three months which is well down on the high last June of 88.8 yuan. Guangdong is expecting the benchmark to be around 16-18 yuan based on a statement of an official at the Chine Emissions Exchange in Guangdong which is the trading platform hosting the auctions. The exchange is yet to be disclosed on how many permits are available for sale in the upcoming auction nut plans to cut supply in this year’s auction to 2 million, that is down from 8 million as an attempt to attract more interest.

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