China emissions prices, trading volumes fall further

Trading volumes and prices in China's national emissions trading scheme (ETS) continued to fall this week.

Transaction volumes totalled 187,027t of CO2 equivalent (CO2e) from 2-6 August, down by 74.3pc from 729,000t a week earlier. No bulk agreement trades took place in the latest week, hitting total volumes.

The open-bid settlement price closed at 52.96 yuan/t ($8.19/t) today, down by 2.2pc from a week earlier in the second successive weekly decline. The weekly weighted average price was Yn54.09/t, up by 0.9pc from last week.

Weekly trading volumes have been falling since the market was launched on 16 July. Total volumes in the three weeks from 19 July to 6 August were 2.03mn t, including 900,000t of bulk trades, less than 50pc of volumes traded on the market's first day.

Prices dipped to Yn51.99/t on 2 August, the lowest level since trading started, followed by a spike to Yn58.7/t on 4 August and then a decline again yesterday.

China's emissions market has shown a "very good price level" since its launch, Zhang Xiliang, director of the Institute of Energy and Environment Economics at Tsinghua University, said this week. The average price of around $8/t is higher than China's marginal cost of $7/t to cut emissions economy-wide, indicating the current level is an "effective emissions price", said Zhang, who took a lead role in designing the national ETS.

Zhang said the carbon price still has space to rise, forecasting it will increase to around $8-10/t during 2021-25 and then to $15/t by 2030.

Weekly emissions policy review

China's Communist Party politburo last week called for the development of a work plan to achieve peak carbon emissions ahead of 2030 but stressed the plan should also consider the actual economic conditions in the country's provinces and regions. "Campaign-like actions to cut emissions" should be corrected, it said, indicating China should apply a less-aggressive approach to achieving carbon neutrality while still "firmly imposing restrictions on high emission- and energy-intensive projects".

China's installed coal-fired power capacity and coal-based power output is expected to keep increasing in the 14th five-year period covering 2021-25, according to a study by the energy institute of the national power grid planner and operator State Power Grid. The institute projects China will reach peak installed coal capacity of 1.25-1.3TW and peak coal-fired power generation of 5,000-5,500TWh, without saying when the peaks are likely to occur. This is up from 1.08TW and 4,630TWh respectively last year.