China's carbon trading regulator will supply an additional 9.4 million offset credits to its seven regional emissions markets as it tries to give industrial emitters an incentive to meet mitigation targets using credits generated by clean projects. The tradable carbon credits are issued by the National Development and Reform Commission (NDRC), China's top regulator, to help finance clean projects like wind power plants.
Firms can buy the credits to meet 5-10 percent of their carbon mitigation obligations on any of the seven pilot exchanges, though the eligibility criteria vary, with local regulators still wary about potential oversupply. According to the NDRC's official database, it has already issued 33 million credits, but less than 9 percent of the total was used for compliance purposes by July this year. Because the pilot exchanges had imposed restrictions on some types of credit, the majority were not eligible for trade.
"We estimate 2.5-3 million credits were bought for compliance purposes, with Shenzhen buying the most at 0.9 million," said Liu Yao, a trader with Profit Carbon, a project developer. Carbon credit prices are normally pegged to the regionally-traded carbon permits, and can vary wildly, with those traded for compliance ranging from 10 yuan ($1.57) to 38 yuan, according to market sources.
Nearly 11 million credits had changed hands by September, with some bought by brokers aiming to swap them for carbon permits and profit from the arbitrage. China launched the pilot trading schemes in 2013 and handed out carbon permits to over 2,000 participating firms throughout the seven regions. Prices on the fragmented market have ranged from 10 yuan in Chongqing to 47 yuan in Shenzhen. The NDRC aims to integrate the separate markets into a national scheme by 2017, and aims to draw up unified eligibility and trading rules.