The Hubei carbon exchange will launch a forward contract for CO2 allowances, it announced Friday, making it the first of China’s seven pilot emissions trading schemes to offer on-exchange forward trading.

From Apr. 20 emitters will be able to trade 2016 allowances on the exchange with a fixed June 2017 delivery date, days ahead of what is expected to be the scheme’s final compliance deadline before it merges into the national cap-and-trade system, according to an official with the exchange.

Financial authorities have banned forward and futures trading in China’s regional pilot carbon markets, a move experts say is one of the major reasons the schemes have suffered from low liquidity so far.

In order to avoid the ban, the Hubei provincial government has already allocated a share of 2016 allowances to ETS participants, and is marketing the forward contract as a “long-term spot product”.

Normally the 2016 allowances would be issued later in the year.

The provincial government has yet to release trading rules for the new contract, but the exchange will hold a launch event on Mar. 31, where details will be presented.

The Shanghai Energy and Environment Exchange and the Shanghai Clearing House last week said they hoped to be the first to launch a forward contract in China, but their product is only expected to go live in September.

By Stian Reklev – stian@carbon-pulse.com

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