China’s carbon price hits record as power generators rush for permits


China’s carbon price continues to rise, setting a fresh record on Aug. 11 as Beijing pushes power generators to obtain sufficient permits for the year.

The price of emissions allowances on China’s national exchange climbed to as high as 70 yuan ($9.68) a ton on Aug. 11, before closing 0.55% higher at 69.9 yuan. This results in a weekly gain to 6%.

Volumes, which have remained sluggish for long periods since the market’s launch two years ago, have also increased. Nearly 225,000 tons were traded that week, making a 19% increase from the previous week.

Carbon prices have steadily risen since hitting a low of 50.52 yuan per ton in April, although the cost of carbon in China is only a fraction of the price on a similar market in the EU.  

China has been cautions in gradually pushing firms to accept pollution fees and is tightening the supply of permits only slowly. Power plants receive free allowances for a certain amount of annual emissions, but if they exceed that, they must buy additional permits from the open market to make up the difference. Under the Chinese system, generators are required to accumulate sufficient allowances by the end of 2023 to cover their emissions in 2021 and 2022.

This year, Beijing has instructed local authorities to ensure that 95% of the annual target is achieved by Nov. 15 to avoid volatility if firms take a last-minute approach to obtaining cover for their emissions. Companies with surplus allowances are being requested to sell to those that are short, according to people familiar with the matter.

That has boosted market activity, particularly among firms that were forced to burn more polluting coal over the last two years to address power shortages or alleviate the impact of drought on hydropower supplies, the people said.

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