July 31, 2014 / 9:15 AM / 6 years ago

China regulator approves fresh supply for carbon market

BEIJING, July 31 (Reuters) - The Chinese carbon market regulator has approved 33 new projects that could yield up to 6 million offset credits per year, equivalent to around half the number of permits traded so far and piling pressure on already shaky carbon prices.

The roughly 2,000 companies facing caps on their greenhouse gas emissions under China’s seven pilot carbon markets can use the offset credits, known as Chinese Certified Emissions Reductions, to cover for 5-10 percent of their annual emissions.

Offset credits are attractive because they are normally cheaper than the regular permits issued by local governments, cutting costs for emitters.

“We are negotiating at prices between 6 and 7 yuan ($0.97-$1.13) per CCER. The competition is fierce,” one project developer who did not wish to be named told Reuters.

The last publicly known CCER trade included Wuhan Iron & Steel, and went through at 7.50 yuan.

In comparison, emission permits in the Tianjin market, the cheapest in China at the moment, trade at around 20 yuan per tonne of carbon dioxide. In Beijing, Guangdong and Shenzhen the cost is almost 60 yuan.

Price drops in some of the markets ahead of the annual compliance date indicate there may be a surplus of permits handed out by local governments.

In Tianjin, prices fell below the 20 yuan level for the first time last week ahead of the market’s first compliance deadline, after having traded as high as 42 yuan in late June.

Prices in Guangdong, China’s largest CO2 market, fell to an all-time low of 41.50 yuan in mid-July after trading at 60 yuan for months after the market started. Prices recovered somewhat when companies began trading 2014 permits instead.

The biggest project in the newly approved batch is a natural gas power plant in Shanghai owned by state-owned power company Huaneng Power International Inc.

By replacing more carbon intensive fuels with gas, the project can cut CO2 emissions by over 1 million tonnes per year, according to a statement on the website of the regulator, the National Development and Reform Commission (NDRC).

Other big power companies, including China General Nuclear, China Three Gorges New Energy, CNOOC, Datang and the State Grid were also among developers who had projects successfully approved.

The new batch takes the total number of CCER projects approved by the NDRC to 49, mostly wind and hydro power stations.

But none of the projects have been issued CCERs yet, as even the earliest movers in the fledgling market are awaiting final integrity checks.

“First issuance could be in September or October, and we expect seven projects to be issued 6 million permits then,” consultancy Ideacarbon said in a note to its clients. (Reporting by Kathy Chen and Stian Reklev; Editing by Michael Urquhart)

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