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China's Guangdong extends carbon deadline, plans new auction
June 12, 2014 / 7:15 AM / 3 years ago

China's Guangdong extends carbon deadline, plans new auction

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BEIJING, June 12 (Reuters) - China's Guangdong province has delayed a deadline for companies to hand over CO2 permits for 2013 emissions and plans an extra permit auction, the China Emissions Exchange said, after firms refused to buy permits in China's centrepiece carbon trading scheme.

The Guangdong emissions market demands all companies buy 3 percent of their permits from government auctions, but when the final planned auction was held last month more than 60 firms chose not to participate because they found the scheme unfair and costly.

Guangdong is the biggest of China's six pilot carbon markets and the centrepiece of policies to wean the world's biggest-emitting nation off polluting fossil fuels and reduce its impact on climate change.

The deadline delay from June 20 to July 15 will allow the government to make some adjustments to individual company targets based on verified emissions and production data, according to a note on the exchange website.

But it will also provide a last chance for over 60 manufacturers covered by the scheme to comply with it.

A total of almost 9.8 million permits have been sold in previous auctions at a minimum price of 60 yuan ($9.64) each.

"The number of permits on sale in the next auction has not been decided yet, but it is unlikely that the minimum price will be lowered. We need to be fair to those who bought in earlier auctions," said an official at the China Emissions Exchange who wished to remain anonymous.

The exchange has been told by the government to schedule the auction in late June, but a final date has not been set.

China plans to launch a nationwide carbon-trading market later in the decade, but implementing the pilot market schemes have proved challenging as they were planned and launched in a short period of time, forcing regulators and market participants both to learn as they go along.

The northern city of Tianjin last month extended the compliance deadline in its scheme.

In Guangdong, the carbon market has been unpopular among power plants and manufacturers because of the high government-mandate minimum price at a time when they are already under pressure from a slower economy.

The requirement that emitters must buy 3 percent of their permits in government auctions - they get the rest for free - has also hurt liquidity in the secondary market.

Since trading began in late December, only around 575,000 permits have traded in the market, and more than half of that was in two recent bilateral trades that were cleared on the exchange, both traded at 60 yuan.

Reporting By Kathy Chen; Editing by Michael Perry

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