* Guangdong carbon mkt will be world's second biggest
* Trade begins briskly on Thursday
* Pricing in line with expectations
(Hrs(Adds comment, detail))
By Kathy Chen
GUANGZHOU, Dec 19 The first day's trading in
what will be by far the largest carbon market in China kicked
off briskly on Thursday with pricing in line with expectations,
as Beijing continues its drive to slow its rapid growth of
Volumes in Guangdong's carbon permit market, expected to be
the world's second largest in terms of carbon dioxide covered,
in early trade surpassed full-day totals during the launches of
the country's three other carbon exchanges.
China, the world's biggest emitter of greenhouse gases,
wants to use markets to achieve its target to cut emissions per
unit of GDP to 40-45 percent below 2005 levels by 2020 at the
lowest possible cost.
Beijing, Shanghai and Shenzhen have already opened markets
of their own, with Hubei province and the cities of Chongqing
and Tianjin expected to follow in the next few months.
The debut trade on the China Emissions Exchange in Guangzhou
went through in line with market expectations at 61 yuan
($10.04), with cement firm Hailuo buying 20,000 carbon permits
from the new energy arm of state-owned power producer Huadian
Energy Co Ltd.
That was followed by a raft of other deals for a total of
120,000 permits, known as Guangdong Emissions Allowances
(GDEAs), in the first 20 minutes of the market, all at 60 yuan
China's other emissions markets each saw around half that
volume during their entire debut days.
The price level matched expectations, following a government
auction of 3 million permits sold at 60 yuan, the official price
floor for auctions, on Dec. 16.
But some observers warned against the risk of price
volatility in the longer term. Emissions markets are often very
price-sensitive in early stages, as seen in markets in Europe,
New Zealand and Shenzhen.
"The biggest concern for companies is how to manage
volatility risks. That's more important than who and how much
traded today," said Jeff Huang, China director of the
Guangdong, home to over 100 million people and with an
economy bigger than Indonesia's, is set to become China's
central carbon trading hub in the near term as its number of
carbon permits dwarfs the combined volume in Beijing, Shanghai
and Shenzhen. Globally it will trail only the European Union.
Guangdong's carbon scheme caps CO2 emissions from 242 of the
province's major power generators and cement, iron and steel
producers at 350 million tonnes per year, with a further 38
million tonnes set aside in reserves for new entrants and
Companies are forced to pay for 3 percent of their expected
emissions in the first year of the scheme, with that share
gradually rising in the future.
The Guangdong government said this week that it would expand
the market to cover five new sectors, including textiles, paper
production and metals, although it gave no timeline.
In Shenzhen, permits currently trade at 73.50 yuan ($12.10),
with prices pushed up on small volumes by private speculators
after the market opened at 28 yuan in June.
Beijing permits trade around 50 yuan ($8.23), while in
Shanghai they change hands at around 25 yuan ($4.11).
In comparison, allowances in the EU market closed Wednesday
Observers say the varying price levels in the Chinese
markets do not necessarily reflect real differences in how
scarce permits are.
Instead, companies are unclear whether they are long or
short permits as this is the first year the markets have been in
operation, and the data the allocation was based on is
uncertain, experts say.
Combined, China's seven markets will regulate around 800
million tonnes of CO2, roughly equal to Germany's annual
(Writing by Stian Reklev; Editing by Joseph Radford)