China Carbon Market Weekly Update – 8 January 2024

Week at a glance (January 2, 2024 – January 5, 2024)

• Activity in China's national Carbon Emissions Allowance (CEA) market started in 2024 with a substantial decrease from the last week of 2023, ending the first week of the new year with 1.18 million tons of weekly total volume. With the second compliance cycle in the books by the end of 2023, a subsequent relatively active 4-day trading week suggested some catch-up buying of CEAs from a few covered emission sources, similar to the first two weeks of 2022 after the end of the first compliance cycle.? Among 1.2 million tons of weekly total volume, 0.60 million came from the 2019-2020 vintage, 0.26 million from the 2021 vintage, and 0.32 million from the 2022 vintage.
• Open market transaction prices closed the week at 73.36 yuan ($10.33) per ton, 7.6% lower than the previous week. The volume-weighted average price of all of the week’s trades was 66.69 yuan ($9.39) per ton, a 14.5% increase from the previous week. For the first time, the 2021 vintage held for two consecutive weeks the highest average price among the three vintages.
• Activity across the nine regional China Certified Emission Reductions (CCER) markets decreased to 46 thousand tons during the week, the lowest it has been in over 4 months. Shanghai led the markets with Tianjin and Sichuan also seeing some trades.

Carbon markets update (January 2, 2024 – January 5, 2024)

Activity in China's national Carbon Emissions Allowance (CEA) market started in 2024 with a substantial decrease from the last week of 2023, ending the first week of the new year with 1.18 million tons of weekly total volume. This volume, however, was still well above the 2023 weekly median volume of 764K. Block trades accounted for over 97% of the week’s total volume. With the second compliance cycle in the books by the end of 2023, a subsequent relatively active 4-day trading week suggested some catch-up buying of CEAs from a few covered emission sources, similar to the first two weeks of 2022 after the end of the first compliance cycle.? Among 1.2 million tons of weekly total volume, 0.60 million came from the 2019-2020 vintage, 0.26 million from the 2021 vintage, and 0.32 million from the 2022 vintage. The 2019-2020 vintages became the most traded vintage for the first time. Both of the newer vintages hit their lowest weekly volumes since vintage-based trading started in late August.

Open market transaction prices closed the week at 73.36 yuan ($10.33[1]) per ton, 7.6% lower than the previous week. The weekly volume-weighted average price of open market transactions dropped 11.5% from the previous week to 70.56 yuan per ton. The volume-weighted average block trade price was 66.61 yuan per ton, a 14% decrease from the previous week. The volume-weighted average price of all of the week’s trades was 66.69 yuan ($9.39) per ton, a 14.5% increase from the previous week. The all-trades average prices of the 2019-20 and 2022 vintages stayed close to each other at around 66 yuan per ton, while the 2021 vintage was much higher at 70.06 yuan per ton. For the first time, the 2021 vintage held the highest average price for two consecutive weeks.

Activity across the nine regional China Certified Emission Reductions (CCER) markets decreased to 46 thousand tons during the week, the lowest it has been in over 4 months. Shanghai led the markets with Tianjin and Sichuan also seeing some trades.

Meaningful CCER price information was available from the Sichuan market, which had only open market transactions. They traded at an 18% discount to their national CEA counterparts for the weekly volume-weighted average price.

[1] ?1 US$ = 7.1029 RMB, middle price, January 5, 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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