China Carbon Market Weekly Update – 20 March 2023

Weeks at a glance (March 13 – March 17, 2023)

  • Activity on China’s national Carbon Emissions Allowance (CEA) market dropped significantly to end the week with a weekly volume of 4,021 tons as block trades were completely absent for the first time since the week of January 30. The announcement of the implementation plan for CEA determination and its allocation to covered entities for the current 2021-2022 compliance cycle (see Regulation Update for more information) on March 16 did not spur any significant market reaction. Open market transaction prices remained stable, closing the week at 56.75 yuan ($8.22) per ton, 1.3% higher than the previous week. The volume-weighted price for all of the week’s trades was 56.19 yuan ($8.14) per ton, less than 1% lower than the previous week.
  • Activity across the nine regional China Certified Emission Reductions (CCER) markets went in the opposite direction of the national CEA market, ending the week with a combined weekly volume of 326,160 tons, more than doubling the volume from the previous week and marking a 2023 high. CCER trading was helped by the announcement of the CEA allocation implementation plan which reaffirmed the eligible use of CCER credits to offset up to 5% of each covered entity’s CEA submission obligation. Shanghai led the markets with over one-third of the combined volume. Guangdong saw its first trades since July 2022. Meaningful CCER credit price information was available from the Sichuan, Beijing, and Guangdong markets. Average prices ranged from 35.92 yuan per ton in Sichuan to 95 yuan per ton in Beijing.
  • On March 16, the Ministry of Ecology and Environment published the implementation plan (the “Plan”) for the determination of allowances and their allocation to covered entities for the current 2021-2022 compliance cycle of the CEA trading scheme. The Plan finalized technical details for determining free allowances for covered entities as well as administrative procedures for the submission process. The Plan, through adjustments to base emission factors, and multiple compliance exemptions that include granting all gas-fired power generation units free allowances up to their actual emissions, effectively ensures most covered entities will have sufficient free CEAs to fulfill their CEA submission obligations by the end of 2023, the deadline for CEA submission for the current compliance.
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