Emission permits in the Shanghai carbon market plummeted nearly 11% on Tuesday to close at 25.40 yuan as oversupplied industrial emitters tried to sell off their surplus.

Spot Shanghai Emissions Allowances (SHEAs) fell 3.10 yuan on the day and have lost over 27% of their value since the beginning of February to reach their lowest since the market began 16 months ago.

“There is oversupply in the market, and it is time to cash in carbon windfall profits,” one market participant told Carbon Pulse.

Compliance companies in all sectors except electricity generators were looking to offload permits, he said.

Just under 20,000 SHEAs traded on Tuesday, data from Shanghai’s carbon exchange showed, around twice the daily average and enough to make a big impact in a relatively illiquid market where demand primarily comes from the power sector.

Observers said they expected the downward price trend to continue as there is insufficient demand to soak up the excess supply in the market.

Meanwhile, the Chongqing market registered its first activity since its opening day in June last year, with 10,240 allowances changing hands at average prices of 24 yuan, according to the Chongqing Carbon Emissions Trading Center.

The most liquid Chinese pilot market on Tuesday was Hubei’s with 102,000 permits traded, closing at 26.59 yuan, down 0.09 yuan on the previous day.

By Stian Reklev – stian@carbon-pulse.com