Carbon market update (June 2022)
Trading in China’s national carbon emissions allowance (CEA) market ended June with a monthly total volume of 770,290 tons, near the all-time monthly low set in March. Open market transactions did set an all-time monthly low of 290 tons. Block trades occurred on 5 of the 19 trading days but accounted for nearly all of the monthly total volume.
The main factors for this low activity, according to some market observers, were 1) a lack of regulatory clarity on the CEA market’s expansion to include more emission sources or allow additional market participants other than the covered entities; 2) lower market participation resulting from COVID pandemic restrictions, and 3) anticipated lower CEA demand due to the general economic environment.
Market prices, on the other hand, continued to hold up well amid extremely low volumes, with open market transactions closing in June at 57.50 yuan ($8.58) per ton, having dropped only 2.5% from May. June’s monthly volume-weighted average price for all trades was 57.86 ($8.63) yuan per ton, up 1.8% from May.
- The Ministry of Ecology and Environment (MEE) Extends Emissions Data Reporting Deadline for Covered Entities of the CEA market and Lowers Key Parameters for Calculating Emissions.
In a notice to provincial-level environmental agencies dated June 7, the MEE, citing the need to fight the COVID pandemic and boost the economy, extended the deadline for key power generation companies to report their 2021 emissions from June 30 to September 30. The notice also instructs some of the power generators to use a lower default value for the thermal coal carbon content from 0.03356 tC/GJ to 0.03085tC/GJ, effectively lowering the calculated emissions from coal combustion. A lower emissions value means fewer CEAs are needed to cover the emissions, leading to lower demand for CEAs from these entities.