China Carbon Market Update (December 2023)

Trading in China’s national carbon emissions allowance (CEA) market in December registered 18.5 million tons of total volume, a significant drop from November but still well above the 2023 median of 2.7 million tons. The market ended 2023—and the second compliance cycle—with 211.9 million tons of total volume for the year. Covering emissions from both 2021 and 2022, the second compliance cycle saw a combined trading volume of 262.8 million tons, easily surpassing the 178.8 million tons for the first compliance cycle which covered 2019 and 2020.

Open market transactions ended December at a new all-time monthly closing high of 79.42 yuan ($11.21[1]) per ton after retreating in November from the previous high set in October. The volume-weighted monthly average price for open market transactions was 74.46 yuan per ton. Block trades set a fifth consecutive all-time high volume-weighed monthly average price at 72.57 yuan per ton. The volume-weighted average price for all trades in December was 73.25 yuan per ton, also a fifth consecutive all-time high.

From the commencement of vintage-based trading in late August to the end of December, the 2022 vintage accounted for 63.4% of total market volume, the 2021 vintage made up 21.5%, and the 2019-2020 vintage 15.1%. Volume-weighted open transaction average prices of the three vintages quickly converged after some initial separation, while those of more volatile block trades maintained sizeable separations from one another throughout the period, with the 2019-2020 vintage generally commanding the highest prices.

[1] 1 US$ = 7.0827 RMB, middle price, December 29, 2023, China State Administration of Foreign Exchange. The same exchange rate is used for all other values quoted in US dollars ($) in the newsletter.

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