As China readies world’s biggest carbon market, key questions remain unanswered

As China readies world’s biggest carbon market, key questions remain unanswered

China is set to launch its long-awaited national emissions trading scheme within the next four months, but major uncertainties linger as the government has yet to clarify who will join the market and how it will work.

Carbon Pulse is gathering emissions traders, regulators and other experts in London on Sep. 26-28 for the second annual Carbon Forward conference, an event aimed at helping market participants navigate this quickly evolving global carbon market landscape.

Government officials are scrambling to launch China’s cap-and-trade programme before the end of the year, but have yet to finalise the design of the scheme, fuelling recent speculation that the market might be postponed. It is not hard to imagine that China’s national ETS is facing huge challenges, but it is hard to see China not launching it this year,” said Tony Gai, managing director of carbon specialist firm Heng Neng. Gai is among the speakers at Carbon Forward and will talk participants through some of the key questions surrounding the Chinese market:

  • Who is expected to join the market from the start: the eight sectors identified by the government in early 2016, the three sectors that emerged as leading candidates this spring, or only power generators, as suggested by recent reports?
  • What can we expect in terms of market dynamics, prices and liquidity once the market is up and running, and will the ETS be an efficient tool to reduce China’s emissions?
  • The China ETS will be by far the world’s biggest emissions market in terms of tonnes of CO2 covered, but will it also hold opportunities for non-Chinese companies?

GAME CHANGER

What is clear is that the Chinese ETS can’t be ignored even if the initial version ends up being limited compared to the original plan of launching a scheme that would regulate 7-8 billion tonnes of CO2 per year.

The electricity generators that would be brought into the market emit some 3.7 billion tonnes of CO2 per year, and should cement and aluminium also be included, that would bring the market’s size up to around 5 billion tonnes. In comparison, the EU ETS covers around 1.7 billion.

**Click here for the agenda or to book your tickets for Carbon Forward 2017**

The launch of such a massive market will, for better or worse, be a step change for the use of market mechanisms to curb greenhouse gases.
For the EU, one of the most eager proponents of emissions trading worldwide, the success of the Chinese scheme is considered sufficiently important that the bloc has committed €15 million since 2014 to help China build the scheme and train officials and industry representatives. “There is obviously a strong interest in pro-active and constructive collaboration between the EU and the China ETS,” said Renato Roldao of consultancy ICF International, who is in charge of coordinating the EU-China ETS programme. Roldao will also speak at Carbon Forward.
EU pioneers have the opportunity to meet a carbon market in the making that is expected to be of unprecedented scale. If it works in China it can succeed in many other locations across the globe and will send strong and positive signals back to Europe,” he added.

“Paying deep attention to China’s ETS is unavoidable.”

OPPORTUNITIES

Meanwhile, some European companies are already seeking a foothold in the Chinese market, with Czech brokers Virtuse and Finnish developers Greenstream examples of firms that have participated in the Chinese pilot markets.

The European Energy Exchange (EEX) in Germany recently unveiled partnerships with Chinese counterparts to offer trade in euro-denominated offshore carbon derivatives to let clients access the market while avoiding the political and capital restrictions that international investors typically face.

“It’s important for multinationals, such as BP and Shell, that have activities in China and will be part of the national scheme to be able to connect what they’re doing in China with what they’re doing elsewhere,” EEX CEO Peter Reitz said.

“That’s where we can help with our European products. Other companies that are not in the scheme but want to trade can use our euro-denominated contracts as a proxy for the Chinese market,” he added.

CARBON FORWARD FACTFILE

  • Speakers are already confirmed from the European Commission, an unprecedented line-up of at least eight carbon market analysts, leading participants from utilities, industrials, banks and trading houses, and the governments of Brazil and Norway – the latter the world’s biggest sovereign buyer of carbon credits. Click here to see the full list.
  • The two-day conference (Sep. 27-28) is being held at the 5-star Canary Riverside Plaza Hotel, while the venue for the pre-conference Training Day (Sep. 26) is just down the street at the Citigroup Centre, 25 Canada Square.
  • It is shaping up to be the event for companies affected by the growing carbon markets. If you have not already done so, reserve your place now
  • Last year’s inaugural Carbon Forward 2016 conference attracted more than 180 delegates & speakers from 27 countries, and this year’s event will be even bigger. Participants, decision-makers, and top-flight speakers are drawn from industry, utilities, brokers / trading houses, government, and trade organisations.
  • Sponsorship opportunities remain for Europe’s top carbon market intelligence and networking event: We have limited sponsorship packages remaining. If your company would like to maximise exposure at the premier carbon conference for managing risks and opportunities in the EU ETS and carbon markets worldwide, get in touch with Mira Csikesz at info@carbon-forward.com
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