BEIJING Feb 3 The lack of a unified regulatory
system for China's fledgling carbon offset market has led to
wild variations in prices in different regions, causing
uncertainty among both buyers and project developers, traders
China's national carbon offset registry was launched earlier
last month, allowing offsets - known as Chinese Certified
Emissions Reductions (CCERs) - to be transferred between buyers
and sellers on the country's seven pilot emissions trading
The move was considered an important first step in China's
plans to create a unified national carbon scheme from 2016, but
price discrepancies between the pilot platforms could make it
harder to harmonise the markets.
China, the world's largest emitter of climate-changing
greenhouse gases, aims to use carbon markets as a key tool to
halt the growth of its emissions by the end of next decade.
CCERs are generated by low-carbon projects that have been
approved by the National Development and Reform Commission
(NDRC). While they are cheaper than regular permits, they can
only cover 5-10 percent of a firm's emissions. Regional carbon
market regulators can also exclude any offset type they feel
does not benefit their markets.
Beijing and Shanghai - the only markets to have finalised
their rules on offsets - both banned the use of CCERs generated
from emission cuts achieved before 2013, ruling out 99.5 percent
of the 14 million CCERs issued so far.
As a result, prices have varied significantly. Spot
deliveries offered to Beijing are priced at 25-30 yuan ($9), but
the most accepted forward contracts stand within the range of
5-20 yuan, according to brokers.
NDRC did not immediately respond to requests for comment.
Wang Kelei, China director of Greenstream, a Finnish carbon
trader, said the uncertainties made it difficult for
participants to plan their budgets. He said CCERs should be
around one third of the price of local permits.
The confusion could also cut profits from developers and
deter investment in some types of CCER-generating projects.
"We have to look very carefully at the different eligibility
restrictions in the various regions," said Susan Zhu, director
at Shanghai Treasure Carbon, which recently co-launched a 200
million yuan carbon fund.
The ban on pre-2013 CCERs in Beijing and Shanghai could
depress prices for offsets from older projects, and might cut
compliance costs in those markets that choose to accept them.
That would add to an already significant cost differential
in the pilot schemes. Beijing firms already pay around 53 yuan
for each permit, compared to 20 yuan in Guangdong.
"How the markets perform is largely determined by the
strictness of local emission cap setting," said Kou Weiwei,
director of Carbon Trading Capital, a UK firm developing
projects in China.
($1 = 6.2594 Chinese yuan)
(Reporting by Kathy Chen and David Stanway; Editing by Joseph