China to Add More Carbon Credits to Give Firms Incentive to Meet Compliance Targets

China to Add More Carbon Credits to Give Firms Incentive to Meet Compliance TargetsThe carbon trading regulator in China will be supplying an additional 9.4 million offset credits to seven regional emission markets as the country tries to give industrial emitters incentive to meet mitigation targets using these credits that are generated by clean projects. Tradable credits are issued by the National Development and Reform Commission, which also helps in the financing of clean projects such as wind power plants.

Firms can then purchase the credits to meet the 5 to 10 percent of their carbon mitigation obligations in any of the seven pilot exchanges, although the eligibility criteria may vary in local regulators as they are still wary on the potential oversupply. Based on the National Development and Reform Commission official database, they have already issued 33 million credits or less than 9 percent of the total that was used for compliance purposes in July of this year. This is because pilot exchanges imposed strict restrictions on several types of credits and the majority were not eligible for trade. It was estimated that around 2.5 to 3 million credits were bought for compliance purposes with Shenzhen buying 0.9 million credits the most.

Carbon credit prices normally pegged to the regional traded carbon permits and vary wildly with those traded for compliance, which ranges from 10 yuan to 38 yuan. Around 11 million credits have changed hands by September as some credits wee bought by brokers that were hoping to swap them for carbon permits and then profit from the arbitrage. China launched the trading schemes in 2013 and gave out carbon permits to more than 2,000 participating firms in the seven regions. By 2017, the National Development and Reform Commission plans to integrate the separate markets into a national scheme and hopefully draw up a unified eligibility and trading rules.

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