China’s Guangdong Starts World’s Second-Biggest Carbon Exchange

China’s southern province of Guangdong began trading permits on the world’s second-biggest emissions-trading system at the highest price in the nation.

Seven trades covering 120,029 metric tons of carbon emissions were completed at 60 yuan ($9.90) to 61 yuan a ton on the first day at the China Emissions Exchange, it said yesterday in an e-mailed statement.

Guangdong, capping emissions at 388 million tons this year, will be the biggest carbon market after the system in the European Union, Charlie Cao, a Beijing-based analyst at Bloomberg New Energy Finance, wrote in a note yesterday.

“The province encapsulates the diverse Chinese economy, with rich, poor, urban, rural, industrial and agricultural areas,” Cao said. The pilot program may be instrumental for a national trading system to be introduced after 2015, he said.

China, the world’s biggest emitter of greenhouse gases linked to climate change, started carbon markets in four regions of seven pilots planned this year as the nation seeks to reduce carbon intensity, a measure of pollution compared with gross domestic product. Guangdong’s price is the highest among debuts and compares with a minimum of 25 yuan in Shanghai and 50 yuan in Beijing, according to data compiled by Bloomberg.

The province sold 3 million tons of emission permits for 60 yuan a ton in a Dec. 16 auction, the first of its kind in China. If future trades are near the price, “it could be a sign that there is no shortage of permits on the market,” and the trading will remain illiquid because auctions can satisfy most of the supply, Cao said.

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

Anhui Conch Cement Co. (914) and China Huadian Corp. participated in the trades yesterday, the exchange said. China National Petroleum Corp.’s unit bought 10,000 tons of offsets known as Chinese Certified Emissions Reductions from CGN Wind Energy Ltd. for 20 yuan a ton, according to the statement.

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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