June 19, 2014 / 8:46 AM / 3 years ago

UPDATE 2-China completes pilot carbon market rollout, but take up uncertain

* China's 7th and last pilot carbon market launched in Chongqing

* Permits covering 145,000 tonnes of carbon traded in first session

* Some participants sceptical about the platform gaining traction (Adds trader quotes)

By Kathy Chen and David Stanway

CHONGQING, China, June 19 (Reuters) - The Chinese city of Chongqing launched its pilot carbon scheme on Thursday, the seventh and final one planned by the country as it looks for ways to rein in its rapidly growing greenhouse gas emissions, the highest in the world.

Chongqing, a sprawling metropolis of 30 million people on the Yangtze river, follows the cities of Shenzhen, Shanghai and Beijing and the provinces of Guangdong and Hubei in launching a trading scheme that allows big local firms to buy and sell permits that cover their carbon emissions.

Choking pollution in China has sparked anger at home, with poor air quality blamed for causing half a million premature deaths a year, while rising carbon emissions have brought international pressure on Beijing to clean up its act.

Some participants at the Chongqing launch were sceptical about the effectiveness of the platform, saying that the much-delayed launch was rushed and choreographed.

"It is a symbolic launch - all the deals announced today were negotiated at 30-32 yuan, and we bid for the volume at the same level as others, at 10,000 tonnes," said a buyer with a power company on the sidelines of the launch ceremony.

China's top climate change official, Xie Zhenhua, who was present at the six prior launches, did not attend the opening ceremony. Only 16 deals were signed, covering 145,000 tonnes of permits at a price of 30-31.5 yuan ($4.83-$5.07) per tonne.

A manager with one of the selling firms, the Chongqing Iron and Steel Group, said he was not planning to make any more trades. He said his firm had been allocated 6.3 million tonnes in permits for 2013, despite reporting emissions of 6 million tonnes for the period.

"No one really needs to buy, and the permits are allocated in accordance with the emissions reported by the company itself so no one will have a shortage," said the manager, who did not want to be named because he was not authorised to talk to media.


China has pledged that by 2020 it will reduce its carbon intensity - the amount of CO2 produced per unit of economic growth - by 40-45 percent from 2005 levels. It has also promised to set up market mechanisms, such as the pilot schemes and a national one by 2017, to help meet its targets.

As of now, only a fraction of China's biggest industrial emitters are covered by the seven pilot platforms, while the plans for a national trading scheme also remain uncertain.

It is unclear whether a nationwide platform will be built on the foundations of the existing exchanges or from scratch, with the seven pilots now using different and largely incompatible standards and trading rules.

Unlike the other pilots, Chongqing's programme covers six other greenhouse gases apart from carbon dioxide, including methane, nitrous oxide and man-made fluorinated gases.

While the other six have chosen to hold additional permit auctions to give firms a last chance to cover their emissions before the deadline, Chongqing is not planning to add new supplies to the market.

It has also said the volume of the permits will shrink by 4.13 percent per year. The municipal government has issued a total of 125 million permits free of charge to cover the greenhouse gas emissions of 242 companies in 2013.

Given the late start, the Chongqing scheme gives firms until June 2015 to comply with their targets for 2013 and 2014.

It will grant market access to institutional and individual investors to boost liquidity through the year instead, though potential investors said they were looking for more clarity.

"We are looking at opportunities to trade in all the seven pilots but Chongqing is the market we least understand," said a director with a British-based investment company, who also attended the launch. ($1 = 6.2090 Chinese Yuan Renminbi) (Editing by Richard Pullin and Himani Sarkar)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below