Guangdong will update its carbon market rules to given China’s biggest pilot emissions trading scheme stronger legal backing and impose tougher penalties on companies that don’t comply, the provincial government said.

The government will set up an expert group which will review the trading scheme and make a list of proposed amendments, the Guangdong Development and Reform Commission (DRC) said.

The DRC note pointed out low penalty rates and weak legal backing as issues that needed to be addressed. Under current rules, a company that fails to comply with the scheme is fined 50,000 yuan ($7,900) and for each allowance it fails to surrender it gets two deducted from future allocations.

The DRC did not say when the review would be finalised, but the new rules are unlikely to be put in place before March next year.

The Guangdong market regulators have in recent months made a series of changes to trading rules in a bid to increase market liquidity.

In September it said it would add six new sectors to the market while also outlining rules for repo deals.

The month before it loosened price control regulations for big bilateral deals in an attempt to get trading houses to take bigger positions in the market. It has also recently changed its auctioning rules.

The need for a more thorough review of the ETS is likely a result of the delay to 2017 of the launch of China’s national market, which means the seven pilot schemes will run a year longer than originally intended.

Shanghai officials said in August it is preparing an overhaul of its ETS to prepare for the delay, which hadn’t been announced yet at that stage.

By Stian Reklev – stian@carbon-pulse.com

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