Chinese traders scramble to pick up fresh offset supply

Published 15:12 on May 28, 2015  /  Last updated at 15:13 on May 28, 2015  /  China, China's Offset Market  /  No Comments

China’s offset market has come to life after the latest issuance of CCERs, with companies in Beijing, Guangdong and Shanghai picking up at least 376,000 offsets – or more than 10% of new supply - less than 24 hours after they were issued.

China’s offset market has come to life after the latest issuance of CCERs, with companies in Beijing, Guangdong and Shanghai picking up at least 376,000 offsets – or more than 10% of new supply – less than 24 hours after they were issued.

Activity in the offset market has been thin so far, mostly due to low supply and the fact that the majority of issued CCERs to date are ineligible in most markets.

But after the government on Wednesday issued 3 million new offsets, of which nearly 1 million came from new projects, traders moved quickly to buy ahead of impending compliance deadlines.

An unnamed brokerage in Guangdong bought 126,000 CCERs in a deal cleared on the local exchange at an undisclosed price, sources told Carbon Pulse.

The transaction came as permit prices in Guangdong on Thursday fell to 17 yuan ($2.74), their lowest levels since the market opened in December 2013.

Meanwhile, 230,000 CCERs traded in two deals, the Shanghai Environment and Energy Exchange reported. An initial100,000 were negotiated bilaterally on Wednesday and subsequently cleared on the exchange, while a subsidiary of state-owned China Power International scooped up another 130,000 traded Thursday.

A further 20,000 reportedly traded on the China Beijing Environment Exchange.

The NDRC has issued around 20 million CCERs to date – far fewer than the 110 million pilot ETS participants are allowed to use for compliance each year.

But market participants were optimistic supply would increase.

“The NDRC has simplified the project approval procedures, which will speed up issuance,” one project developer said.

However, frustration remained over the vastly different approaches taken by pilot ETS regulators on CCER restrictions. The governments in Beijing and Shanghai have introduced strict limitations on which CCERs local emitters can use, whereas in Tianjin there are no restrictions at all.

“The diversified restrictions in the local markets have disappointed market players. It is expected that the central government can remove the differences,” one trader said.

But an NDRC climate official said yesterday the national ETS might be delayed to 2017, which could mean emitters would have to live with different rules for an additional year.

By Stian Reklev – stian@carbon-pulse.com