China Carbon Market Monthly Update – March 2023

Monthly carbon market update (March 2023)

Trading in China’s national carbon emissions allowance (CEA) market totaled 1.3 million tons in March, a decrease of nearly 30% from February. Block trades accounted for close to 98% of March’s total volume, leaving this month’s open market transaction volume the 3rd lowest on record.  On March 16, the Ministry of Ecology and Environment announced the implementation plan (the “Plan”) for CEA determination and allocation to covered entities for the current 2021-2022 compliance cycle. The Plan, through measures such as adjustments to base emission factors, compliance exemptions, and obligation ceilings, will likely see most entities covered by the national emission trading scheme secure sufficient free CEAs to fulfill their CEA submission obligations by the end of 2023, the deadline for CEA submission for the current compliance cycle. It is thus no surprise that the market had a muted reaction to the Plan’s announcement.

Prices for open market transactions remained stable amid low volumes, closing March at 56.00 yuan ($8.15)[1] per ton, 1.8% higher than in February. The daily closing price of open market transactions in March hovered within a tight range between 55.00 to 57.00 yuan ($8.00-8.29) per ton, matching the prices seen in February. The volume-weighted average price for block trades was 52.65 yuan ($7.66) per ton for March, its lowest since October last year. This price was also 5.7% lower than in February, a sizable drop considering the prevailing price stability seen over the last 15 months. The volume-weighted average price for all trades, pulled down by lower prices for block trades, was 52.73 yuan ($7.67) per ton in March, 5.7% lower than in February and its lowest since January 2022.

[1] 1 US$ = 6.8717 RMB, middle price, March 31, 2023, China State Administration of Foreign Exchange. The same exchange rate is used for all other values quoted in US dollars ($) in the article.

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