Trading of New Carbon Credits in China Prompts Wild Price Swings

Trading of the first voluntary carbon credits issued in China since 2017 has delivered wild price swings.

A market for new China Certified Emission Reduction credits, or CCERs, reopened March 7 after the government restarted approvals following an eight-year suspension amid concerns about the quality of projects being enrolled. CCERs can be purchased by polluters in the country’s national carbon market to offset as much as 5% of their allotted emission allowances, so prices for the two assets should be similar.

Instead the resumption in trading came with wild price swings. CCER prices jumped to as high as 107.36 yuan a ton on Monday, a 21% premium to the allowances it can offset. By Thursday, though, they had fallen to 72.81 yuan, a 17% discount.

Trading of the offsets was brisk, with a total of 911,000 tons of credits exchanging hands in the first five days of trading, nearly triple the volume of the mandatory market. It’s unclear whether the volatile trading is the result of state-owned firms wanting to support the program’s restart, or simply because there’s a relatively limited pool of newly available credits.

China introduced CCERs in 2012 to reward activities that help avoid or remove the release of greenhouse gases but halted the program in 2017. The Ministry of Ecology and Environment restarted the program last year, allowing companies to once again apply for certain projects to be eligible to sell credits.

This time, though, new approvals would apply only to solar thermal power, deepwater offshore wind, afforestation, mangrove restoration, methane emission recovery and efficient lighting — the types of projects that likely need extra funding to be profitable. 

The ministry last week approved nine new projects supplying about 9.5 million tons of credits this year, including seven deepwater offshore wind farms and a thermal solar plant. Developers of those assets include China Three Gorges Corp., State Power Investment Corp., China Energy Investment Corp., and China General Nuclear Power Corp.

China’s mandatory national carbon market launched in 2021 for power utilities, but has been plagued by oversupply and low liquidity, keeping prices far below what they are in Europe. China’s government has signaled it plans to add steel, aluminum, and cement producers by the end of 2025 to ensure the market covers a larger share of the country’s total emissions.

NOTE: Units use metric tons except for RGGI in short tons. Prices from some sources can be delayed. Some prices are quoted in units of Environmental Offset, and these are equivalent to one ton of CO2 avoided. The one-day change is the latest available. The weekly change calculation uses the latest quoted local currency value. 

With assistance from Dan Murtaugh.

This article was generated from an automated news agency feed without modifications to text.