China Hubei carbon market reports 100 pct compliance rate

Hubei province, China’s second largest carbon market, reported a 100 percent compliance rate in its first trading year, thanks to a decision by the local authority to postpone the deadline by which firms had to surrender their permits.

The deadline was originally set for May 30, but was postponed to July 10 as regulators dealt with complaints from firms that they were being treated unfairly. The China Hubei Emissions Exchange said 27 companies missed the July deadline, but they were now all fully complied.

It said participants cut CO2 emissions by 7.8 million tonnes during the trading year, amounting to 3.19 percent of the total.

According to market rules, firms that fail to surrender permits to cover their CO2 reduction targets are subject to fines. The exchange has yet to reveal whether any firm will face a 150,000 yuan ($23,441.16) penalty for failing to meet the deadline.

With the deadline over, August trading volumes so far have dropped 96 percent month-on-month. Prices closed at 25.54 yuan on Thursday, down from the record of 28.14 yuan on July 14.

In June, cement firms covered by the Hubei exchange complained that permit allocations were insufficient, but their calls for leniency were rebuffed, easing market concerns that big industrial emitters would be let off the hook.

China, the world’s biggest greenhouse gas emitter, has promised to use market mechanisms to help bring CO2 to a peak by around 2030 and cut carbon intensity – the amount produced per unit of GDP – by 60-65 percent below 2005 levels by the end of the next decade.

China’s seven pilot carbon markets all currently operate independently and accept different types of credits. Regulators are currently drawing up unified trading rules in preparation for the launch of a nationwide scheme.