Shanghai changes CO2 market rules in wake of price crash

Published 15:38 on June 15, 2015  /  Last updated at 15:38 on June 15, 2015  /  China, China's Pilot Markets  /  No Comments

Shanghai has narrowed the range of intraday price movements allowed in its carbon market to 10%, the local carbon exchange said Monday night, in a bid to avoid price shocks like the one that hit its ETS last week.

Shanghai has narrowed the range of intraday price movements allowed in its carbon market to 10%, the local carbon exchange said Monday night, in a bid to avoid price shocks like the one that hit its ETS last week.

Last Thursday, Shanghai emissions allowances (SHEAS) plunged 30% to an all-time low of 12.50 yuan ($2) as sellers dumped their surplus, sparking questions of whether the price could go all the way to zero in the over-allocated market.

SHEAs have picked themselves up since, closing Monday at 20 yuan, but the municipal government has moved to ensure similar price shocks won’t rattle the market in the future.

Effective immediately, the price in Shanghai’s ETS can no longer move by more than 10% on an individual day, the Shanghai Energy and Environment Exchange said in a message late Monday.

The previous limit was 30%.

The new rule only applies to trades carried out on the exchange.

For bilateral deals (that must be cleared on the exchange): trades below 100,000 permits must stick to the 10% limit, deals of between 100,000-500,000 can move within 30% of the previous day’s closing price, transactions above 500,000 permits have no restrictions.

By Stian Reklev – stian@carbon-pulse.com

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