The price collapse in Shanghai’s emissions trading scheme continued Tuesday as allowances fell 10% to 5.40 yuan ($0.83), a fifth consecutive session ending in record lows.

Chinese markets were closed Monday due to a public holiday, but the extended weekend offered no respite for Shanghai’s carbon market.

The 2015 SHEA contract tumbled another 10% – the maximum allowed daily price movement – to 5.40 yuan, with 25,813 allowances changing hands.

The contract has now lost 50% of its value since Mar. 25.

“There is nothing supporting the price as all the allowances have been freely allocated,” one analyst told Carbon Pulse, adding that the price might drop to around 4 yuan before meeting resistance.

When designing the scheme, Shanghai officials fixed the allocation levels for the three years spanning 2013-2015.

The municipal government announced last year that it had met its 2015 carbon intensity target a year early, underpinning claims from traders that there was a surplus of allowances in the market.

While the government is expected to tighten allocation for 2016, that is unlikely to impact prices until after June, when emitters will surrender SHEAs covering their 2015 emissions.

According to observers, supply is mainly coming from small emitters that have recently finalised their 2015 emission verification process and want to offload their surplus for the year.

By Stian Reklev – stian@carbon-pulse.com

Not yet signed up to CP Daily? Subscribe to our free newsletter here