Poor data quality and low auction levels are key hurdles for China’s national carbon trading market, experts say
- Trading activities slowed down in the second year compared to the first trading year for the national ETS
- The national ETS has continued to battle low prices and sluggish trading, hindered its role in supporting China’s net-zero emissions goals
Poor quality data and supply shortages remain key barriers for China’s national carbon emissions trading scheme (ETS), with the world’s largest carbon market seeing lower-than-expected trading volume and weak carbon prices in the past year, according to climate experts.
China’s carbon market – responsible for a seventh of the world’s greenhouse gas emissions – is expected to see more liquidity later this year with the injection of new carbon allowances to emitters and the relaunch of China’s suspended voluntary carbon market, the China Certified Emission Reduction (CCER) scheme, said experts. Nevertheless, carbon prices will remain relatively low due to government management.
The national ETS wrapped up its second year of operation on July 16 with the cumulative transaction volume of carbon emissions allowances reaching 239.9 million tonnes, and market value reaching 11.03 billion yuan, according to the Shanghai Environment and Energy Exchange, the department that oversees the national ETS.
“Key challenges for the national ETS include the Covid pandemic [which] postponed release of key policies and added to more market uncertainties, opaque fundamental data, and measurement, reporting, and verification (MRV) issues,” said Tan Luyue, carbon analyst at data provider Refinitiv.
Trading activities slowed down in the second year compared to the first trading year for the national ETS. From July 2022 to the last trading day on July 14, 2023 only 45.9 million tonnes of carbon allowances exchanged hands with a corresponding market value of 2.54 billion yuan. This means that over 80 per cent of total trading volume on ETS and market value come from the first trading year.
Carbon prices on the national ETS closed at 60 yuan per tonne on July 14, the last trading day before the national ETS wrapped up its second year of trading, compared to 51.23 yuan per tonne on its first trading day on July 16 in 2021, and below the 65 yuan per tonne forecast from Refinitiv in 2021.