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Guangdong Sells $30 Million CO2 Permits in First Auction

China’s southern province of Guangdong sold 3 million metric tons of emission permits for 180 million yuan ($30 million) in its first auction.

Yesterday’s auction, the first of its kind in China, drew an average bid of 60.71 yuan a ton, with the highest at 81 yuan, the China Emissions Exchange, which oversees trading in the province, said on its website. The exchange settled on a selling price of 60 yuan a ton for all the permits offered, with 28 companies bidding.

Guangdong, the largest of seven carbon markets planned in China, is the first region to use auctions to allocate a portion of its emission permits instead of giving all of them away for free. The price of 60 yuan is the highest in the nation and compares with a minimum of 28 yuan a ton in Shenzhen, 25 yuan in Shanghai and 50 yuan in Beijing.

China, the world’s biggest emitter of greenhouse gases linked to climate change, began carbon markets in four cities this year as the nation seeks to cut carbon intensity, a measure of pollution compared with gross domestic product. The government has said the pilot exchanges are a precursor to a national trading system to be introduced as soon as 2016.

“Auctions in Guangdong will help to activate the market in this early stage,” Charlie Cao, a Beijing-based analyst at Bloomberg New Energy Finance, wrote today in a note. Still, it will be difficult for participants to make specific bids without a liquid secondary market or future prices available, he said.

Companies in Guangdong won’t be able to buy or sell free permits accounting for 97 percent of their emission quotas until they purchase the balance at auctions, the exchange said last week.

The province will allocate quotas for 388 million tons of carbon emissions to 242 companies by mid-December, the Guangdong provincial Development and Reform Commission said Nov. 26. Quotas for the auction yesterday are part of 29 million-ton charged quotas planned this year in Guangdong.

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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