Shanghai Environment and Energy Exchange (SEEE), the current exchange and operating body for China’s soon-to-open national carbon market, issued an announcement on June 22 regarding the rules of the national emission trading scheme (ETS), as reported by Caixin later that day. The announcement stipulated that the trading of carbon emission allowances (CEAs) must occur on SEEE’s trading platform. For each listed carbon emissions right transaction, SEEE limits trading volume to less than 100,000 tons of carbon dioxide equivalent (CO2e) and prices to a floating range of 10% based on the latest trading session’s closing price. For bulk agreements that entail more than 100,000 tons of CO2e, the price floating range is relaxed to 30%. Additionally, the trading time is 9:30-11.30 AM and 1-3 PM, except for national holidays and closed days declared by the trading institution. Bulk agreements, however, can only occur in the afternoon hours.

Apart from trades by agreements, SEEE will also permit one-way bidding. To illustrate, a trading entity can put forward a bidding request to the trading institution, which will issue a bidding announcement for eligible intended transferees to make quotations and complete the transaction within the agreed time. The announcement implies that the current trading platform only enables trading for CEAs but not certified emission reductions (CERs), and the participants of the auctions only include enterprises now, according to Chen Zhibin, the chief analyst at Beijing-based green investment think tank SinoCarbon. At its initial stage, the national carbon market aims to regulate 2,225 electric power companies as the key emission enterprises (KEEs).

The national carbon market is scheduled to launch later this June, yet the exact date remains uncertain. In addition to the recent announcement by SEEE, many official orders and rules have led up to the national market’s inception. For example, the Ministry of Ecological Environment (MEE) first issued a notice in March that detailed the list of KEEs and the preliminary guidelines for the national ETS. Earlier this month, Shenzhen Judicial Bureau released interim regulations adopting MEE’s guidelines and outlining the next steps for the city’s regional pilot carbon market. Although SEEE will soon take over the transactional services of the regional pilot exchanges after the national market opens, the regional pilots like Shenzhen’s remain valuable as a point of experiments for new market mechanisms and financial instruments. Guangdong, for instance, is in the process of piloting carbon emissions futures contracts.

Sources:

https://finance.caixin.com/2021-06-22/101730347.html

https://database.caixin.com/2021-06-23/101730565.html

https://news.cnstock.com/industry,tt-202106-4719764.htm

https://www.scmp.com/business/article/3138367/chinas-carbon-neutral-goal-shanghais-new-national-carbon-emissions-trading