Traders expect offset supply rush for China’s pilot CO2 markets -survey

Published 02:45 on March 24, 2016  /  Last updated at 09:58 on March 24, 2016  /  China, China's Offset Market, China's Pilot Markets  /  No Comments

Chinese offset traders surveyed by analysts at Point Carbon expect their current CCER holdings to nearly triple in size by June, suggesting prices in the country's pilot emissions trading schemes may face additional downward pressure before the mid-year compliance deadlines.

Chinese offset traders surveyed by analysts at Point Carbon expect their current CCER holdings to nearly triple in size by June, suggesting prices in the country’s pilot emissions trading schemes may face additional downward pressure before the mid-year compliance deadlines.

In a CCER supply curve analysis released this week, Point Carbon surveyed 11 offset traders collectively holding around 4 million offsets, around 12% of the total number issued in the Chinese market so far.

“Overall, our participants expect to have over 7 million credits issued by June,” the survey said, nearly tripling total supply from those traders to around 11 million.

The analysts noted that some of the surveyed parties may have been too optimistic in their assessment, but the report nevertheless showed that the market expects a significant bump in available offsets by June/July, when emitters in the pilot schemes must hand over carbon units to the government to cover their 2015 emissions.

Overallocation and regulatory uncertainty have caused carbon prices to drop to near-record lows in several of the pilots, and an increasing number of traders are betting that the trend will continue.

While the fresh supply would likely weigh on prices, comments made this week by the national market’s chief architect, who confirmed that pilot allowances will be given some value in the national ETS might offer some relief.

According to the Point Carbon survey, CCERs are offered to buyers in the secondary market in a 10-25 yuan ($1.54-3.84) range, with the bulk of the volume available at the lower end of that range.

Prices vary from pilot to pilot because the schemes apply different eligibility criteria.

Offsets fetch the highest prices in Beijing, where CO2 allowance prices are also the highest, and in Hubei, which has the strictest eligibility rules.

By Stian Reklev – stian@carbon-pulse.com

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