April 2, 2014 / 1:33 AM / in 4 years

China's Hubei launches market to cut carbon emissions

WUHAN/BEIJING, April 2 (Reuters) - China’s Hubei province formally launched its carbon market on Wednesday, imposing caps on greenhouse gas emissions from 140 major energy and industrial emitters.

Hubei, home of 58 million people and a GDP equal to that of Austria, became the sixth region in China to introduce a market to halt rapid growth in carbon emissions, blamed by scientists for causing climate change.

China is the world’s biggest-emitting nation, and Beijing wants to use markets to reduce its emissions per unit of GDP to 40-45 percent below 2005 levels by 2020.

In the first few minutes of trading, 210,000 permits cleared on a trading screen visible to guests at the launch ceremony.

The permits traded at 21 yuan ($3.38) each, the lowest in all six Chinese markets.

Hubei Energy Group, the biggest power generator in the province, sold 200,000 permits.

State-owned energy firms PetroChina and Huaneng bought 50,000 permits each, with Shell snapping up 20,000.

Those trades had been negotiated in advance, and are unlikely to reflect general market liquidity, which has been patchy in the other Chinese carbon schemes.

The Hubei government has issued 292.2 million permits to scheme participants for the first year of the scheme, according to a government document seen by Reuters last week, equal to 97 percent of their 2010 emissions.

The biggest company in the market will be Wuhan Iron and Steel, one of China’s largest metals producers, which has 28 facilities included.

A further 7.8 million permits will be sold in government auctions, while 24 million have been set aside in reserves.

The first auction was held on Monday, when 2 million permits sold at 20 yuan each, the official minimum price.

Hubei firms can use offset credits, known as Chinese Certified Emissions Reductions (CCERs), to cover for up to 10 percent of their emissions, but are restricted to using credits from projects located in the province.

Companies that fail to comply with the scheme will be fined 150,000 yuan and given fewer free permits the following year. (Reporting by Kathy Chen and Stian Reklev)

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