China Carbon Market Weekly Update - 20 May 2024

Week at a Glance (May 13, 2024 – May 17, 2024)

• China's national Carbon Emissions Allowance (CEA) market continued its slow-down, ending the week with a total volume of 146 thousand tonnes, the second lowest year-to-date volume for a full 5-day trading week. As the first half of May passed without any news on policy or compliance status of covered entities, it was not surprising that market activity was sparse. Among the weekly total volume, 15.5 thousand tonnes came from the 2019-2020 vintage, 100 tonnes came from the 2021 vintage, and 130.5 thousand tonnes came from the 2022 vintage.
• Prices for open CEA trades slipped slightly but stayed near historical highs, closing the week at 97.10 yuan ($13.67)?per tonne, 2.9% lower than previous week. The volume-weighted average price for block trades, however, took an unexpected dive to 74.00 yuan per tonne, nearly 20% lower than the previous week. The volume-weighted average price of all of the week’s trades, dragged down by the lower priced block trades, also decreased nearly 20% from the previous week to 76.55 yuan (US$10.77) per tonne.
• Activity across the nine regional China Certified Emission Reductions (CCER) markets went the opposite direction to the national CEA market, surging to a weekly combined volume of 338.6 thousand tonnes, its highest in four weeks. Shanghai again led the markets with nearly 60% of their combined volume. Guangzhou registered 130 thousand tonnes of trades, marking the first time that market has seen any activity since the week of April 12.

Carbon Market Update (May 13, 2024 – May 17, 2024)

China's national Carbon Emissions Allowance (CEA) market continued its slow-down, ending the week with a total volume of 146 thousand tonnes, the second lowest year-to-date volume for a full 5-day trading week. As the first half of May passed without any news on policy or compliance status of covered entities, it was not surprising that market activity was sparse. Coming all from the last day of the week, block trades accounted for 89% of total volume, a typical pattern between block and open trades for a sluggish market. Among the weekly total volume, 15.5 thousand tonnes came from the 2019-2020 vintage, 100 tonnes came from the 2021 vintage, and 130.5 thousand tonnes came from the 2022 vintage.

Open trade prices slipped slightly but stayed near their historical highs, closing the week at 97.10 yuan[1] ($13.67)[2] per tonne, 2.9% lower than the previous week. The volume-weighted average price for block trades, however, took an unexpected dive to 74.00 yuan per tonne, nearly 20% lower than the previous week. The volume-weighted average price of all of the week’s trades, dragged down by the lower priced block trades, also decreased nearly 20% from the previous week to 76.55 yuan (US$10.77) per tonne.

Activity across the nine regional China Certified Emission Reductions (CCER) markets went the opposite direction to the national CEA market, surging to a weekly combined volume of 338.6 thousand tonnes, its highest in four weeks. Shanghai again led the markets with nearly 60% of their combined volume. Guangzhou registered 130 thousand tonnes of trades, marking the first time that market has seen any activity since the week of April 12.

Prices disclosed by exchanges or inferred from official volume and trading value information varied widely among the three markets that saw activity. Sichuan had an all-trade average price 5.3% higher than its counterpart for the national CEA market, which was the first time that either the Sichuan or Shanghai market held a CCER price premium over the CEA since early December. Guangdong’s reported price was difficult to interpret, although it was not the first time that a token price was reported by the Guangzhou exchange.

[1] Starting with the 26 February 2024 issue, this newsletter calculates our own daily overall market closing price using the volume-weighted average of traded CEA vintages. This replaces the closing price reported by the Shanghai Environment and Energy Exchange (SEEE), which is an equal-weighted average of the closing prices of all three CEA vintages. The closing price reported by the SEEE does not reflect market reality due to the frequent and vast volume differences among the vintages on any given day. For the same reason, this newsletter also records the daily high and low prices of open market transactions using the highest and lowest prices of any of the three vintages that have trades on the day, instead of the equal-weighted averages of the highest and lowest prices of all three vintages as reported by the SEEE.

[2] 1 US$ = 7.1011 RMB, middle price, May 10, 2024, 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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