The Guangdong municipal government could launch a 600 million yuan ($96 mln) carbon fund derived from CO2 permit sales in the first half of 2015, according to a report released by government advisors.

The fund will invest in carbon-cutting projects and improvements of the region’s emissions market, and could act as a role model for the national ETS, said the report released Monday by researchers at the Sun Yat-sen University in Guangzhou, who advise the government on carbon market matters, and market analysts ICIS.

A Guangdong official told local media in December that the provincial government would put 80 percent of future permit revenue into the fund.

The Guangdong market regulator year auctioned around 8 million permits for the 2013 emissions year at a minimum price of 60 yuan each to scheme participants.

The high minimum price for permits, which were mandatory for emitters to buy, sparked outrage among emitters, who felt it was unfair because China’s other pilot carbon markets did not have similar requirements.

In 2014, the minimum price was lowered to 25 yuan, due to rise gradually to 40 yuan over four auctions, and participation was no longer mandatory.

SHENZHEN LINK?

The report also encouraged linking the Guangdong market with the emissions trading scheme in Shenzhen.

Shenzhen is part of Guangdong province, but operates its own CO2 market due to its status as a special economic zone.

Talks on linking the two have been ongoing for a while, but officials have yet to make a final decision.

The two markets have a number of rules that would be difficult to align without major revisions, and there is concern in Shenzhen over the potential impacts of a link. The Guangdong market covers roughly ten times the amount of CO2 as the Shenzhen scheme, but the price in Shenzhen is twice that of Guangdong.

By Stian Reklev – stian@carbon-pulse.com