A fifth of emitters failed to meet Friday’s compliance deadline in the Hubei carbon market, data from the local emissions exchange showed, prompting traders to speculate that the government would informally allow participants another week to meet their targets.

According to the Hubei carbon exchange, 111 of the scheme’s 138 participants had surrendered a total of 201.7 million Hubei Emission Allowances (HBEAs) by end of business Friday.

That means 27 companies failed to comply and could potentially face financial penalties, although market participants said they expect the government, which has already postponed the deadline once, to be lenient.

“Next week might be a grace period,” one trader told Carbon Pulse.

Cement producers are prominent among the non-compliers as several started compliance preparations late, having made a failed plea to regulators in June for more permits.

But despite the rush to comply, prices only rose 3.7% on Friday to settle at 25.85 yuan ($4.16), trading as high as 25.99 during the session.

Nearly 1.2 million HBEAs moved on the exchange, a new record for the market.

The Hubei scheme has a 2014 cap of 324 million tonnes, of which the government set aside 298 million allowances to be given out for free.

It distributed 193 million of the allowances immediately and withheld the rest in case verified production data for 2014 would require changes to the allocation plan.

It remains unclear if all 298 million have been distributed.

The remaining 26 million were for set aside for a new entrant reserve and auctioning.

Initially, 7.78 million allowances were earmarked for auctioning, but only 2 million of those have been sold.

By Stian Reklev – stian@carbon-pulse.com

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