Cement firms seal first CO2 allowance OTC forward deal in Guangdong

Published 08:34 on March 31, 2016  /  Last updated at 08:34 on March 31, 2016  /  China, China's National ETS, China's Pilot Markets  /  No Comments

Two local cement companies have signed the first forward trade of Guangdong Emissions Allowances (GDEAs) in a deal negotiated by brokers Vcarbon, the China Emissions Exchange in Guangzhou announced.

Two local cement companies have signed the first forward trade of Guangdong Emissions Allowances (GDEAs) in a deal negotiated by brokers Vcarbon, the China Emissions Exchange in Guangzhou announced.

The deal was the first to go through after Guangdong in February became the first of China’s seven pilot cap-and-trade programmes to issue rules for OTC forward trading.

Under the deal, 79,120 GDEAs will be transferred between the two unnamed cement companies’ accounts on Apr. 25.

The broker involved, Vcarbon, is the biggest intermediary in the Guangdong carbon market.

Guangdong is one of several pilots seeking ways around the ban on futures trading in the Chinese carbon market, which is seen to dampen market liquidity and restrict companies’ ability to manage the risk the CO2 regulations expose them to.

Hubei and Shanghai are both developing contracts where forwards would trade on the local carbon exchanges.

The National Development and Reform Commission (NDRC) is seeking to include futures trading in the national market, which opens next year, despite opposition from financial regulator China Securities Regulatory Commission, a draft document leaked online earlier this week showed

This has caused some observers to doubt whether the NDRC will be able to include a futures market in the ETS.

“It seems very likely there won’t be futures in the early phase of the national ETS. That’s something to bring in towards 2020,” one expert told Carbon Pulse.

By Stian Reklev – stian@carbon-pulse.com

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