Guangdong on Friday sold 422,000 CO2 permits at the minimum price of 35 yuan ($5.63) each, less than half of the 1 million permits on offer, the China Emissions Exchange in Guangzhou announced.

The auction was the third of four planned government permit sales for the 2014 emissions year in China’s biggest carbon market.

Seven companies, all compliance buyers, bid successfully at the auction, the exchange said.

Interest was low as the auction price, which was set last year, was significantly higher than prices in the thinly-traded secondary market.

Guangdong permits traded at 20.20 yuan when the auction was announced on Mar. 18, but have since soared as some traders have sought to trade on the spread between prices at the auction and in the secondary market.

Permits closed Friday at 32.54 yuan, their highest levels since early October. Traders said they expect the price to fall again after the auction.

By Stian Reklev – stian@carbon-pulse.com