China ETS: Emissions prices, volumes hit new record low

Trading volumes and prices in China's national emissions trading scheme (ETS) have fallen to new lows, with just 658t of CO2 equivalent (CO2e) traded this week.

The average price fell by 6.6pc from a week earlier to 44.7 yuan/t ($6.93/t) in the week of 30 August to 3 September, with prices ending at Yn44.67/t today, down by 0.9pc from a week earlier. Prices settled at Yn44.66/t yesterday, the lowest since the ETS began operations in July.

No bulk agreements traded this week, compared with 455,000t a week earlier. Total open bid trading volume last week was 44,527t.

The power installations that are covered by the national ETS are allocated their emissions allowances using an output-based benchmark, while emitters receive ample, free allowances, keeping transaction volumes low.

The benchmark needs to be gradually tightened as power installations upgrade to higher efficiencies and lower emissions intensity, to avoid the risk of over-allocation, Tsinghua University professor Zhang Da said this week.

It is essential to create a solid price signal that will help push forward the decarbonisation of the coal-based power sector, Zhang said. He also called for the inclusion of an auction and an emissions cap in the ETS to increase market liquidity, as well as an incentive mechanism to phase out fossil fuels.

Weekly policy review

China's top working group for peak emissions, headed by vice-premier Han Zheng, has set up a team to focus on emissions accounting work and co-ordinate between provinces and industrial sectors. The accounting team will be led by major economic planning agency the NDRC, the environment and ecology ministry and the national statistics bureau, while industrial associations in the coal, steel, petrochemical, non-ferrous metal and electricity sectors will also be involved.

Hainan province will establish a carbon emissions trading centre to connect China's national ETS with the international market, according to a government filing on 1 September. The initiative has been included in a plan to open up Hainan's financial sector as part of its transformation into a free-trade zone.

Also this week, energy planner the NEA pledged to strengthen its oversight of the energy and environmental sector in response to government criticisms of its work. It set out a "rectification plan", including pledges to accelerate development of non-thermal energy sources and reduce coal's share of total energy consumption. A detailed plan for peak emissions from the energy sector is due by the end of this year.

China ETS volumes, prices