Shanghai prepares ETS back-up plan to bridge gap to national carbon market

Published 10:26 on August 14, 2015  /  Last updated at 16:55 on August 14, 2015  /  China, China's National ETS, China's Pilot Markets  /  No Comments

Shanghai is considering expanding the sectors covered by its emissions trading scheme and introducing futures trading, as the municipal government grapples with a potential one-year delay of the national scheme.

Shanghai is considering expanding the sectors covered by its emissions trading scheme and introducing futures trading, as the municipal government grapples with a potential one-year delay of the national scheme.

The first trading period in China’s pilot carbon markets ends in mid-2016, when emitters surrender allowances for their 2015 emissions. A national market in one form or another was supposed to be introduced at that stage, but nationals officials are giving indications this might be pushed back to 2017.

The Shanghai Development and Reform Commission (DRC), the Shanghai market’s regulator, said in a statement Friday it is designing a back-up plan in case there is a gap between the end of the first trading period and the launch of the national market.

The DRC is considering several changes for the potential one-year additional operation, according to the statement and information providers Idea Carbon, which hosted a seminar this week for market participants on the issue, where DRC officials spoke.

The changes under consideration are:

  • Adding up to ten new sectors, including electronics manufacturers, electric machinery, cars and pharmaceuticals, adding to the current 191 companies in electricity generation, iron and steel, petrochemicals, large buildings, ports and aviation
  • Developing new carbon finance products for the market in additional to its proposal to allow carbon futures trading
  • Replacing grandfathering with industrial benchmarks for permit allocation
  • Applying nationally developed MRV standards that the central government is preparing for the national market
  • Charging for some allowances, instead of handing them all out for free

The city’s carbon market regulates some 160 million tonnes of CO2 per year, but has so far failed to generate significant volumes.

Since Aug. 6, the allowance price has increased 28.5% to 14.90 yuan ($2.33), but only on the back of 20 traded allowances, with a total value of 274 yuan – slightly less than the cost of lunch buffet while enjoying Shanghai’s famous skyline from the Oriental Pearl TV Tower.

By Stian Reklev – stian@carbon-pulse.com

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

Comment