BEIJING, July 15 (Reuters) - Nearly every carbon emitter covered by China’s largest pilot emissions scheme met Tuesday’s compliance deadline, a government official said, as permit prices slipped to an all-time low amid ample supply and with no last-minute scramble for allowances.
The Guangdong scheme - one of China’s seven pilot carbon markets aimed at controlling greenhouse gas emissions that contribute to global warming - caps the carbon output of 202 electricity generators and manufacturers.
The pilot markets are to prepare China for the launch of a national emissions scheme later in the decade that is expected to be the world’s largest. The country is the world’s biggest greenhouse gas emitter and is under increasing international pressure to slow down the rapid growth in its emissions.
By closing time on Tuesday, 182 companies had handed over permits to the Guangdong government to cover their 2013 emissions, said an official at the Development and Reform Commission (DRC), the agency administering the scheme.
Eighteen companies saw their emissions drop below the threshold for participation, while only two companies failed to hand over permits, the DRC official said.
“We will strictly apply punishment according to the law, and release the names of the violating companies,” the official said.
The high compliance rate marked a shift from May, when over 60 companies had said they would not participate, forcing the government to delay the compliance deadline by two weeks.
Power supplier Guangdong Yudean Group was the biggest emitter in the scheme, handing in over 21 million permits to the government.
The firms had been issued a total of 350 million permits, representing 350 million tonnes of carbon, with 99.97 percent of those returned to the government.
Cement, iron and steel manufacturers suffering from China’s slowing economy had complained that they were forced to buy 3 percent of their total permits through government auctions at a minimum price of 60 yuan ($9.66) each, a price that many said was too high.
The government sold a total of 11.1 million permits in auctions, all at the minimum price. Beyond that market activity has been limited, indicating few companies had problems meeting their targets.
Since the market began last December, only 1.2 million permits have changed hands in the secondary market. The permits traded on Tuesday at an all-time low of 41.50 yuan, after having hovered around the 60-yuan level until two weeks ago.
“It was an easy cap for industries in the first year, so as to get things on track quickly,” said one broker who wished to remain anonymous.
The DRC official said Guangdong is planning several changes to its scheme to improve functionality and market liquidity, including the controversial mandatory auctions.
“We will stick to charging for some of the allocations, but companies can choose whether they want to buy the permits (in auctions),” the official said.
That would leave companies with the options of using the secondary market more, or reducing their demand for permits through cutting their emissions.
The official said the government might drop the set minimum price and instead link auction prices to the secondary market.
It will also add seven more industries to the scheme, including ceramics and textile producers.
The 2014 allocation plan will be released later this month, the DRC official said. (Editing by Tom Hogue)