China's carbon market cools quickly after hectic first-day activity

State-owned power utilities, provincial producers and oil majors with their own generation assets all participated in the first day of trading on China's nationwide carbon market, but enthusiasm quickly waned on a second day July 19, according to corporate websites and official social media accounts.

Day one participation showed promise in a carbon market that, with over 2,000 companies and 4 billion mt of allowances involved, is the world's largest.

All participants on the first day, July 16, were either state or provincial government-owned entities, charged with supporting the market launch. This they did, driving traded volumes up to 4.1 million mt CO2.

The second day of trading, however, saw this figure drop 97% to 130,800 mt of CO2 July 19, official data showed.

The market is focused solely on power generation, including autogeneration facilities owned by non-power utilities.

In particular, two state-owned oil majors, Sinopec and China National Petroleum Corporation, disclosed they had four subsidiaries with autogeneration units participating in first-day carbon trading. Neither shared trade volume or price.

Among power generation companies, all of China's Big Five independent power producers participated in first-day trading: Huaneng Group, Huadian Group, China Energy Investment Corp (CEIC), State Power Investment Corp (SPIC) and Datang Group.

Collectively, these companies represent 44% of China's total installed generating capacity of 2.2 TW by the end of 2020, official data showed.

SPIC, CEIC, and Huadian provided details on participating subsidiaries, trade volumes or average prices on their official websites.

SPIC made over 60 transactions on July 16, with total trade volumes of 250,000 mt of CO2 at an average price of Yuan 51/mt ($7.86/mt).

CEIC said its Longyuan Power Carbon Asset Management Company represented four of CEIC's subsidiaries and traded 250,000 mt of CO2, without sharing price information.

Huadian said four of its subsidiaries participated in first-day trading, with some Yuan 25.5 million ($3.93 million) of the transactions guided by its carbon asset management company.

Huadian did not share the trade volume and price, but official data estimated trade volume around 497,800 mt of CO2 based on a first-day weighted average trading price of Yuan 51.23/mt ($7.90/mt).

Two provincial producers, Zhejiang Energy Group and Shenergy Group, owned by Zhejiang and Shanghai provincial governments respectively, were also among the first batch of participants.

Zhejiang Energy Group disclosed day-one trade volumes of 1 million mt of CO2, the highest reported among all participating companies, according to its official Wechat public account.

July 19's weighted average daily price of China's Carbon Emission Allowances or CEA was Yuan 52.30/mt ($8.06/mt), showing a 2.1% increase from the first-day price on July 16, official data showed.

The market is to support China's pledge of carbon peaking by 2030 and net zero by 2060, the country's environment ministry said July 16.