China’s Guangdong province on Tuesday sold all 500,000 allowances on offer in the third of four planned auctions intended to cover 2015 emissions, with prices dropping to the 12.69 yuan ($1.95) price floor, which was more than 20% below the secondary market.

Eight companies bid successfully at the auction, with bids ranging from 12.69-16.49 yuan, the China Emissions Exchange in Guangzhou announced.

The auction cleared well below the secondary market, where allowances closed on Monday at 16.20 yuan.

Only one company was unsuccessful, and the total bids amounted to just over 554,000 permits.

In the previous auction, held in December, all 300,000 allowances were sold at 15 yuan each, well above the 12.80 yuan price floor.

In the past two months, only some 1.15 million permits have traded in the secondary market.

Observers say the Guangdong ETS was over-allocated from the start and demand has been reduced further as fossil fuel generation has since fallen and economic has slowed.

By Stian Reklev – stian@carbon-pulse.com

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