Feb-23 Monthly_China national ETS

In general, prices of carbon emission allowances under the national ETS (China Emission Allowances - CEAs) were stable throughout February, trading within a slightly wider range (RMB 55-57/t) compared to that of January (RMB 55-56/t). Prices through this period averaged RMB 56.09/t before settling 1.79 % lower month-on-month, forming a slight contango trend after its continuous drops through four consecutive months from October 2022. During the first half of February, CEAs closing prices remained at RMB 56/t, unchanged from the level before and shortly after the national market shut down due to the Spring Festival holiday. From 15 February, prices gradually increased to RMB 57/t on 21 February, before decreasing to RMB 55/t during the month’s last trading days.

Without holiday factors, the overall trading activities remained relatively meagre due to the lower-than expected policy progress. Out of February’s 20 trading days, 12 sessions recorded volumes under 600 tons. Over 1.85 million tons changed hands, considerably higher than the 257.4 thousand tons traded in January, albeit still much lower than an all-time high in traded volume during December last year (26.2 million tons). It is worth noting that the trade volume of February was mostly supported by bulk agreement transactions occurring on four trading days. With a total of 1.62 million tons, bulk trades contributed nearly 87.57 % of the total trade volume. This is in line with our forecasts mentioned in the 

 that, without significant regulatory updates or clarifications from the Chinese government, and in combination with the long lead-time to the next compliance deadline (31 December 2023), trading activities would not increase dramatically throughout February. On top of that, in early February, Wang Naixiang (chairman of the China Beijing Green Exchange (CBGEX)) made an official announcement regarding the completion of the registration and trading systems for the offset market. His statements sparked a renewed interest in the much-anticipated revival of this scheme, further disincentivizing substantial transaction moves in the national carbon market.

China ETS pilots - Average price (Jan and Feb-2023)

China ETS pilots - Allowance traded volume (Jan and Feb-2023)

China ETS pilots - Daily price comparison (Feb-2023)

China ETS pilots - Daily volume comparison (Feb-2023) 

According to exchange data released by the CBGEX, Beijing Emission Allowances (BEAs) experienced a highly volatile February. Following ten days without trading activities, BEAs prices dropped steeply from RMB 110.4/t on 13 February to merely RMB 51.47/t on 17 February, a precipitous fall of nearly 53.4 % within only five days. This was then followed by a gradual rebound to RMB 74.2/t through the last trading days, forming a significant V-shape. It is worth noting that, as of mid-2022, BEAs prices had soared at a breakneck pace from around RMB 70/t to an all-time high of RMB 149/t in early December last year, heralding the difficulty in maintaining such an ever-increasing rate in a long term. The sharp plunge of BEAs prices during February marked a continuation of the trajectory observed in December last year, as explained in our 

. Due to the auction organized under the Beijing pilot on 23 November 2022, followed by the end of prolonged compliance deadline for participants of the Beijing market until 30 November 2022, in combination with the holiday impacts early this year, participants were less incentivized to make substantial transactions. This caused the BEAs closing price to fall to merely RMB 51.47/t, the lowest since 7 April last year.

Meanwhile, seeing continuous growth throughout the whole month, the closing prices of Guangdong Emission Allowances (QDEAs) surpassed RMB 80/t for the first time since 4 July 2022. With the continuing weakness of BEAs in mid-February, QDEAs replaced BEAs as the most expensive carbon allowances. Following a light bullish trend, the closing prices of Fujian Emission Allowances (FJEAs) retreated from a level of RMB 26.5/t on the last trading day of January to trade in a range between RMB 27/t and 30.7/t. The closing prices of other regional markets were relatively stable without much movement. Meanwhile, the average prices of eight ETS pilots continued to vary greatly. With an average of RMB 75.46/t, GDEAs ranked first, followed by other key allowances such as BEAs (RMB 63.5/t), Shanghai Emission Allowances (SHEAs) (RMB 57.42/t), Shenzhen Emission Allowances (SZEAs) (RMB 55.03/t) and Hubei Emission Allowances (HBEAs) (RMB 49.33/t).

Following the slow recovery of trade activities after the Spring Festival, the total trade volume of eight regional pilot markets in February was 1.4 million tons, continuing to drop 40.72 % from the modest trade volume of January (2.36 million tons). Trade volumes under the Hubei and Fujian pilots decreased significantly. We attribute this downward trend to the fact that many enterprises under the Hubei pilot had already completed their compliance buying in December 2022, while participants under the Fujian pilot had recently surrendered allowances prior to the compliance deadline on 10 January. Compared to January when the trade volume of the Fujian market reached over 1.22 million tons, only 24.24 thousand tons changed hands throughout February, a sharp drop of above 98 %. Meanwhile, trade volumes of the Guangdong, Tianjin, Shanghai and Beijing markets increased in February, albeit still far too negligible compared to their high levels in December last year.

Market liquidity remained relatively low in most regional pilots. Similar to January, only the Guangdong and Hubei markets saw transactions on each of the 20 days in February. The Fujian Haixia Equity Exchange, Shanghai Environment and Energy Exchange, and China Emissions Exchange (Shenzhen) each had 13 trading days, followed by 10 and 9 days reported respectively by the Tianjin Climate Exchange and the CBGEX. As mentioned previously, trading activities in the Fujian pilot tapered off after the compliance deadline in January with no transactions occurring during the week beginning on 10 February. Meanwhile, daily trades in the Shanghai and Beijing markets were largely symbolic with single- and double-digit volumes reported on up to five trading days in each market. February also marked the second consecutive month without trading sessions in the Chongqing pilot after only four trading days were reported in December last year. The longer-than-expected release of the Chongqing allocation plan for 2021 continues to be a major reason for the wait-and-see attitude of participants.

CCER volume (Feb-2023)

Since its shutdown in 2017, the supply of Certified Emissions Reductions (CCERs) - China’s offsetting scheme - has constantly been drained. As predicted in our 

, despite the perceived high buying interest, there was no pickup in transacted CCERs. After a marginal increase in CCER volume in January, the offset market saw its liquidity drop significantly throughout February. Only 269.9 thousand tons of CCERs were traded across platforms, down 58.95 % from around 657.5 thousand tons in January. With 161.34 thousand tons of CCERs, accounting for over 59.7 of the total CCERs traded in February, the Tianjin pilot unseated the Sichuan market as the largest CCER trading bourse. The Sichuan and Shanghai markets respectively rank second and third in terms of CCERs transaction volume, with nearly 67.63 and 40.94 thousand tons changing hands. As in January, no CCERs were traded in the Beijing, Guangdong, Hubei, Chongqing or Fujian markets.

In early February, applications of six Chinese brokerages for their self-operated participation in carbon markets were replied with 

 by the China Securities Regulatory Commission (CSRC). These brokerages were Huabao Securities, Huatai Securities, Shenwan Hongyuan Securities, Orient Securities, CICC Securities and China Securities. Prior to that, other two financial institutions namely Guotai Junan Securities and CITIC Securities had also received approvals from the CSRC. Since the launch of China ETS, financial institutions have not been permitted to participate in carbon markets, though the Chinese government reiterated that their participation would be approved at a later stage. Thus, such a positive signal from the Chinese financial authority is expected to be a big step towards a more open and liquid ETS. Nevertheless, given that the Chinese government has yet to officially announce the timeline for the broad engagement of brokerages in carbon markets, in combination with the lack of further clarification from the financial authority regarding its no-objection reply, it is expected that the eight brokerages will only be eligible for trading activities under the regional pilots.

On 7 February, the Ministry of Ecology and Environment (MEE) issued the “

Notice on doing a good job in the reporting and management of greenhouse gases emissions of enterprises in the power generation industry from 2023 to 2025

”. According to this document, power generation facilities under the national ETS are required to formulate the data quality control plans, submit annual greenhouse gases (GHGs) emissions reports, and carry out annual emissions report verifications for the period from 2023 to 2025. Aimed to prevent carbon market data fraud, the notice included a detailed set of updated guidelines for the key emission units in the power sector, requesting the involvement of regional authorities to enhance data reporting activities of these units. The notice set deadlines for different MRV activities: 31 March for the submission of GHGs reports, 31 July for the announcement of evaluation results of verification technical service agendas, and 31 December for the completion of data quality control plans. All data must be disclosed to the public through the management platform (the National Carbon Market Comprehensive Information Portal).

On 17 February, the Supreme People's Court circulated a document entitled “

Opinions of the Supreme People’s Court on providing judicial services for the complete, accurate and comprehensive implementation of new development concepts to actively and steadily promote carbon neutrality

”. Although the document looks broad, it provides a legal guarantee for the orderly development of China’s carbon markets and the achievement of dual carbon targets.

On 22 February, during the MEE’s regular press conference, 

, a spokesperson of the MEE listed a series of policy documents issued by the MEE last year, including the “Implementation plan on accelerating the establishment of a unified and standardized carbon emission accounting system”, reaffirming the Chinese government’s commitment to the establishment of a unified national ETS, as well as the vigorous promotion of China’s green and low carbon development. Liu Youbin’s statements mirrored those delivered by 

, the Minister of the MEE, during his report at the 2023 National Ecological and Environmental Protection Work Conference on 16 February that China had been doing a good job in the management of the second compliance cycle of the national carbon market, including the acceleration of building a long-term mechanism for carbon emissions data quality control.

At a regional level, on 6 February, the Tianjin Administration for Market Regulation issued the “

Implementation plan for establishing and improving the standard measurement system for carbon peak and carbon neutrality in Tianjin

”. As stated in this plan, by 2025 the Tianjin’s standard measurement system for carbon peak and carbon neutrality will basically take shape, followed by the steady improvement of carbon-related standards and measurement capabilities until 2030 and the completion of this system by 2060.

On 7 February, the People’s Government of Guangdong Province issued the “

Guangdong province carbon peak implementation plan

”. This plan focuses on the implementation of 15 major actions to be undertaken by the Guangdong pilot during the Fourteenth and Fifteenth Five-Year Plan periods, including green and low-carbon transformation, energy conservation and carbon reduction. Notably, the Guangdong pilot aims to increase the proportion of non-fossil energy consumption to above 32 % by 2025. 2030 targets for Guangdong include increasing this share to 35 %, peaking emissions, and aligning emissions intensity of key industries including iron & steel and cement with international standards. For example, carbon emissions per unit of both long-process crude steel and cement clinker are now set to be reduced by above 8 % compared to 2020 levels.

On 16 February, the Shanghai Municipal Bureau of Ecology and Environment rolled out the “

Key points of Shanghai’s 2023 actions to address climate change

”. In this document, the core tasks were determined, including the promotion of Shanghai as an internationally influential carbon trading, pricing and financial center, the strengthening of the data quality management for the national carbon market, and the acceleration in establishing a national unified carbon emission trading institution under the guidance of the MEE. Subsequently, on 21 February, the Shanghai Market Supervision Administration together with eight other local government bodies released a joint notice on the “

Implementation plan for the standard measurement system construction of Shanghai’s carbon peak and carbon neutrality

”. Similar to Tianjin’s implementation plan mentioned above, by 2025 the standard measurement system of Shanghai’s carbon peak and carbon neutrality is expected to basically take shape, followed by the gradual completion of this system by 2030 and its full establishment by 2060.

On 17 February, the Hubei Market Supervision Administration issued the “

Management measures for the construction of a carbon measurement center in Hubei province

”, clarifying the application, supervision and management of Hubei’s carbon measurement center. This provides a helpful guideline for the data collection, analysis, evaluation and registration services for enterprises under the Hubei pilot.

On 2 February, the Guangzhou Emissions Exchange - the sole auction and trading platform for carbon emission allowances in Guangdong, cooperated with the Environmental Defense Fund (EDF) to issue a report entitled “

The internationalization of the China GHG voluntary emissions reduction program

”. With the goals of enhancing the CCER project system and serving the goal of carbon neutrality, this report provides a useful comparative analysis of the CCER and Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) systems, exploring the prospects of the CCER and its international use.

, during an event entitled “Beijing urban sub-centre construction of national green development demonstration zone – Launching ceremony for building a national green exchange” in Tongzhou district, Wang Naixiang, chairman of the CBGEX, announced the completion of the registration and trading systems designed for the CCER market. As the Beijing pilot will host China’s offset trading once the CCER programmes are restarted, this announcement provides an important infrastructure guarantee for the much-anticipated relaunch of the carbon offsetting system in China.

Following the slow resurgence of trading activities after the Spring Festival, we expect the liquidity of the national market to marginally increase in March. Nevertheless, with the compliance deadline still ten months away, and without any significant regulatory developments rolled out by the Chinese government during Q1 of 2023, particularly the official release of the allocation plan for 2021-2022, the national market is unlikely to see any considerable uptick in prices or volumes. The engagement of financial entities as new participants in China’s carbon pilots is seen to be a positive factor for improving market liquidity. We expect that the number of these financial entities will gradually grow, and that they will eventually be enabled to participate in the national scheme. Yet, given the modest number of these entities, as well as their participation being restricted to only regional pilots, this is unlikely to have an immediate impact on the liquidity of China’s carbon market as a whole.

Mirroring the development nationally, most regional markets are expected to remain calm going forward. According to the 

 released on 4 December 2022 by the Department of Ecology and Environment of Guangdong Province, two auctions will be held at the beginning of 2023 to sell a total of 500 thousand tons under the Guangdong pilot. With the date of the second auction scheduled for 22 April 2023, it is expected that the first auction will be launched soon, either during March or early April, leading to a sharp increase in trade volume of the Guangdong pilot.

In early February, the Beijing pilot had accomplished its preparation work to become the official national exchange of the CCERs.This is a positive progress which has ignited hopes for the revival of the long-awaited offset scheme. Yet, the severely scarce CCER supply due to the years-long suspension of the offset programme, as well as the constant absence of a detailed timeline for its relaunch, leave few incentives for substantial transactions in a near term. Considering these factors, we have a neutral to bullish outlook for CCERs compared to the previous month.

Feb-23 MONTHLY CHINA ABRE

News

A new beginning for financial players in China's carbon markets?  

ETS expansion to maritime will aggravate EUA scarcity

Commission proposal to extend gas reduction measures

Union database – March update to timelines

March 2023 HUPX Pan-European auction 

2nd Italian Auction in 2023 - All prices within the 6-7 EUR corridor

Week 11: KAU22 rises while reporting due date approaches

Week 11: RGGI V23 Future Dec-23 contract prices drop as low Q1 auction price is published 

GO Week 11 Overview - The 2022 vintage loses ground

Week 11: The benchmark contract remains about the USD 30.00/t threshold this week among regulatory updates and the failure of Silicon Valley Bank

Week 11: EUAs slip on financial market uncertainty, weak auctions

Week 11: VCM has the lowest volumes of future standardized contracts since the beginning of the year

EAC Market Report - In The Midst Of A Bullish Wave

A platform with real-time GO data and insights, reporting prices and market fundamentals for Wind, Hydro, Solar, Biomass, Biomethane and RGGOs. 

Our community offers access to webinars, discussions and updates from industry leading experts and analysts. 

China Emission Allowances (CEAs) prices were stable from January to February, averaging RMB 56.09/t before settling 1.79 % lower month-on-month. Following the trade resurgence after the Spring Festival, liquidity in the national ETS slightly improved with a few bulk transactions reported mainly in the second half of February.

In most regional pilots, closing prices remained flat (apart from the Beijing pilot). The total volume traded in eight pilot markets decreased sharply.

Liquidity in the offset market dropped significantly during February. The majority of China Certified Emission Reductions (CCERs) were traded in the Tianjin bourse. As in January, no CCERs were traded in the Beijing, Guangdong, Hubei, Chongqing or Fujian markets.

Notwithstanding the lower-than-expected policy progress, prices and trade volumes in China’s carbon markets are expected to follow a slightly bullish trend in March.

Our Platform gives you unfettered access to price benchmarking, analytics, new and insights covering the green certificates markets. 

Register for a trial now and someone from our team will be in touch with you to learn more about your involvement in the markets and to answer any questions you may have.