The Chinese government is reportedly to consider a steeper cut in carbon quotas, which would result in a higher cost for small and inefficient coal power plants.
A person familiar with the plan told media that under Ministry of Ecology and Environment’s draft plan for carbon allowances for more than 2,000 power companies in 2021 and 2022, major coal plants will be allocated 7.9% less credits per megawatt-hour generated. The reduction is greater than the 1% reduction indicated previously. It would be considerably harsher on coal plants smaller than 300 megawatts in size, whose criteria would be reduced by 12%.
The proposal hasn't been finalized and could alter, according to the source, who requested anonymity since the plan hasn't made public.
Last year, when China opened its carbon market, it handed power plants an excessive number of allowances, enabling numerous corporations to hold excess allowances at the end of the year. If issuances are cut, plants will either have to acquire those excess allowances and push up prices, or burn less coal.
Because of the stricter benchmarks, consulting firm Refinitv increased its 2022 China carbon pricing projection to 65 yuan per ton from 58, according to Qin Yan, a senior analyst.
