China’s national carbon emissions trading system (ETS), currently the largest carbon market in the world, officially began online trading at the Shanghai Environment and Energy Exchange (SEEE) on the morning of July 16, as reported by Sina on July 17. On its first day of trading, the market opened at RMB48 per ton of carbon emissions and closed at RMB51.23 per ton, up 6.73%. The total trading volume of the day reached 4.1m tons with a turnover of over RMB210m. State-owned power giants, including PetroChina , Sinopec , Huaneng Group, and Huadian Group, also sealed deals on the first day of trading.

As a tool to facilitate emission reduction, the national carbon market was initially scheduled to launch on June 25 but was later postponed. Some analysts suggested that the delay was mainly to make time for further completion of administrative processes, improvement of related policies and regulations, and verification of carbon emissions data. While the first two tasks have been an ongoing effort, the last reflected the emerging issue of emissions data fabrication. To illustrate, Inner Mongolia’s environmental authority found earlier this month that Inner Mongolia Erdos Electric Power & Metallurgical, jointly held by Inner Mongolia Erdos Resources and Mitsui & Co , had falsified its emissions data reported in 2019. First of its kind in the country, this case prompted a tighter regulatory grasp on emissions data integrity and transparency at the national market’s inception.

At its launch, the national ETS involved 2,225 electric power enterprises that emitted about 4bn tons of carbon per annum, but the list was projected to incorporate other carbon-intensive industries in the future, such as petrochemical, construction, steel, paper, and aviation. Specifically, the Ministry of Ecological and Environment (MEE) last month authorized China Iron and Steel Association (CISA) to conduct research for including the iron and steel industry in the national ETS. As the market expands and more participants enter, the supply of emission allowances will become limited in the long run and result in an increase in the carbon price, commented Ren Baoxiang, a researcher at Hainan Green Finance Research Institute. According to the 2020 China Carbon Pricing Survey, published last year by China Carbon Forum and ICF , the total market capitalization of the national carbon market would reach RMB284bn by 2025. The report also estimated that the carbon price would rise to RMB71 per ton in 2025 and further to RMB93 per ton in 2030.

Sources:

https://finance.sina.com.cn/jjxw/2021-07-19/doc-ikqcfnca7370296.shtml

http://news.sina.com.cn/c/2021-07-18/doc-ikqcfnca7573091.shtml

https://www.caixinglobal.com/2021-07-16/chinas-national-carbon-market-makes-its-first-trade-101741452.html

https://baijiahao.baidu.com/s?id=1705178211934746443&wfr=spider&for=pc

https://www.nasdaq.com/articles/local-chinese-authority-reveals-carbon-emissions-data-violation-ahead-of-ets-launch-2021

https://www.senecaesg.com/blog/mee-entrusts-cisa-with-preparation-for-including-steel-industry-in-ets/