China Carbon Monthly Market Update – January 2022

Monthly carbon market update (January 2023)

Trading in China’s national carbon emissions allowance (CEA) market in the first month of 2023 dropped to its second-lowest monthly volume on record. The Chinese New Year’s holidays shortened the trading days for the month to only 16 days and there was a complete absence of block trades. Covered entities under China’s emissions trading scheme (ETS) had likely finished with their year-end internal CEA balancing. With the deadline for the 2021-22 compliance cycle still 11 months away, they were back to the wait-and-see mode that prevailed for most of 2022. Market activity is not likely to gain much traction in the foreseeable future, at least not before policymakers can shed some light on key issues such as the inclusion of additional industrial sectors in the ETS and permission for financial players to participate in the CEA market.

Market prices changed little amid thin volumes, further evidence of the lack of interest from the market participants in engaging with the market. The daily closing price of open market transactions moved within a range of 55.00 to 56.00 yuan ($8.14-8.28)[1] per ton for the month, ending the month unchanged at 56.00 yuan per ton for each of the last five trading days. The volume-weighted average price for all trades in January was 55.72 yuan ($8.24) per ton.

[1] 1 US$ = 6.7604 RMB, middle price, January 31, 2023, China State Administration of Foreign Exchange. The same exchange rate is used for all other values quoted in US dollars ($) in the newsletter.

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