Guangdong will issue a total of 408 million CO2 allowances for 2015, the provincial government said on Monday, the same number it issued last year, paving the way for over-supply and depressed prices to continue weighing on the market, according to analysts.

China’s biggest carbon market will issue 370 million allowances to 186 existing facilities covered by the ETS, the provincial DRC said Monday.

In addition, 38 million permits will be set aside in government reserves for new entrants, price control and quarterly auctions. The amount of permits for auctioning has been cut to 2 million from 8 million last year. The price floor on auctioned permits has been removed.

“It seems 2015 will be another year with over-supply as benchmark levels are the same year-on-year,” said Chai Hongliang, an analyst with Thomson Reuters Point Carbon.

The total allowance number is the exact same as for last year.

Power generators, including a hefty 63 coal-fired power plants, will receive 95% of the allowances they are expected for free, while manufacturers will get 97%.

Guangdong’s carbon price is currently hovering around 15-16 yuan ($2.42-2.58), among the lowest in China as the scheme is struggling with over-allocation.

The provincial market is carrying over a huge permit glut each year, and a 12% growth in cement production last year failed to make an impact.

By Stian Reklev – stian@carbon-pulse.com

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