Coal news and updates

Traders in China have been keenly tracking the newly launched emissions trading system with a lot of interest. This despite the fact that trading is as of now limited to select emitters, unlike the earlier pilot ETS where there were fewer barriers to entry.

 

The ETS is being closely monitored by traders who hope to be able to participate at a later stage when trading is opened up to institutional investors. The ETS, that has been 10.

 

Day 3 volumes, on July 20, were 162,000 mt of CO2, a slight increase from Day 2, but nowhere near the volume of 4.1 million mt CO2 seen on Day 1.

 

"Liquidity is still not that good," said a Beijing-based developer. "Only compliance companies are allowed to do trading so volumes are not that high."

 

The prices, however, have been substantially higher than pilot ETS prices.

 

"Many of us thought it would be around [Yuan] 30-40, but it crossed 50," the developer said. "It has exceeded expectations. A lot of companies are trading for publicity as there is so much hype around the launch. We cannot take the current trends as a yardstick for how the ETS will pan out later."

 

Higher-than-expected prices are mainly due to participants being "nervous and excited" about the launch of trading, said Yan Qin, lead carbon analyst at Refinitiv.

 

"It also shows the emitters are eager to stockpile allowances in anticipation of tighter rules going forward," said Qin, who is based in Oslo. "The current compliance cycle only covers 2019 and 2020 emissions, but most enterprises shall have two-year forward looking horizon. With China's thermal generation +15% in H1 2021, many coal plants will expect their generation to rise more in 2021 and even old units have to be fired up now. Thus some of the enterprises could expect shortage for the 2021 compliance year and are stockpiling allowances for future."

 

The prices are still substantially lower than other global ETS prices like the EU ETS. Experts and traders are of the opinion that the lower prices are to prevent resistance from the Chinese power lobby.

 

 

Source : https://www.spglobal.com/platts/en/market-insights/latest-news