China ETS: Emissions trading volumes, prices recover

Trading volumes in China's national emissions trading scheme (ETS) rose fivefold this week, while prices edged higher.

The total open-bid transaction volume over 13-17 September was 32,090t of CO2 equivalent (CO2e), compared with 6,312t CO2e last week. Volumes surged to 21,900t today, ahead of the mid-autumn festival that will close markets on 20-21 September.

This week's weighted-average price increased by 1pc from a week earlier to 43.99 yuan/t ($6.81/t). The closing price today was Yn43.43/t, down by 1.3pc from 10 September.

There were no bulk agreements traded for a third straight week.

Chinese authorities have been calling for improvements to the carbon pricing mechanism. China should develop rules to set emissions caps, which would create the basic foundation for an effective carbon trading market, and also include more emissions sectors and third-party participants in the ETS, the government-backed China Council for International Co-operation on Environment and Development (CCICED) said in a 10 September report.

The national ETS initially covers only thermal fuel-based power generation. Allowances have been awarded for free by the government, based on relative carbon-intensity benchmarks rather than absolute emissions, reducing incentives to trade on the ETS.

Weekly policy review

China will improve its voluntary greenhouse gas emission offset trading mechanism, while also including offset projects such as forestry carbon sinks, renewable energy and methane utilisation in the national ETS, top governing body the state council said this week. The comments were part of a guidance document on reforming the ecological protection compensation system, with the aim of increasing incentives for low-carbon projects and initiatives.

Shanghai's ecology and environment agency said this week it had begun preliminary work to include the petrochemical, chemical, steel, metal and aviation sectors in the national ETS, including emissions data reporting and accounting.

China is intensifying measures to clamp down on industrial energy consumption after some provinces missed their energy use and intensity targets in the first half of this year. The government will set total energy consumption quotas for each year and tighten approvals for new projects with high energy use and intensity, as well as ban approvals for new energy-intensive projects if a provincial government misses its energy-control target for a certain period, top economic planning agency the NDRC said.

The NDRC will also raise the frequency of energy use reviews of each province to quarterly instead of annually for the 2021-25 period.

China ETS volumes & prices