China's national carbon emissions allowance (CEA) market trading prices fluctuated downward in November, falling to 102.38 yuan/t from 104.43 yuan/t earlier in the month.

However, the prices averaged 104.82 yuan/t during November, ticking up 1.6% from an average of 103.15 yuan/t in October. Over the month, the highest price reached 106.02 yuan/t, while the lowest was 100.53 yuan/t.

The market transactions improved substantially, owing partly to the approaching end of the third compliance settlement period, which added to enterprise compliance pressure.

Meanwhile, the government released a notice on the allocation and compliance of 2023 and 2024 CEAs for the power industry, only about 60 days before the compliance deadline for the 2023 CEAs. The short trading window significantly boosted trading volumes in a short period of time.

In addition, an adjustment in CEA carry-over rules spurred companies with excess allowances to sell in order to earn more carry-overs for compliance in subsequent years, thus impacting carbon prices.

Trading volumes

In November, the trading volume of CEA in China's national market totaled 60.84 million tonnes, with the total value reaching 5.93 billion yuan. Both were higher than the January-October total.

Specifically, trades of bulk agreement contracts were 53.17 million tonnes, valued 5.13 billion yuan, occupying nearly 87.4% of the trades, while that of listed agreement contracts reached 7.67 million tonnes, valuing 797.33 million yuan.

The average trading volume per day reached 2.51 million tonnes, surging over 200% compared to October, the highest so far this year. The highest trading volume and value were registered on November 29, at 6.47 million tonnes and 639 million yuan, respectively.

In the year to November 29, China's CEA trades reached 113.28 million tonnes, with the value totaling 10.73 billion yuan. Total CEA trades since the market went online reached 554.90 million tonnes, which valued 35.65 billion yuan.

Policies

On November 19, Li Chao, a deputy director of policy research under the National Development and Reform Commission, announced at press conference that China would establish the statistical system for carbon emissions and guide local governments to issue instructions and methodological guidelines for the calculation of carbon emissions.

The Carbon Neutrality Frontier 2024, hosted by the Carbon Neutrality Branch of the Chinese Society for Metals during November 28-29, focused on low-carbon ironmaking, low-carbon steelmaking, hydrogen metallurgy, the CEA market and carbon asset management. The event provided guidance and a platform for major sectors to accelerate their low-carbon transitions.

Internationally, global climate governance and carbon market system may suffer setbacks after Donald Trump was elected as the 47th President of the United States on November 6. He had been clear and firm on climate change during his last tenure, advocated for the vigorous development of fossil fuels, and even withdrew from the Paris Agreement.

On November 11, nations participating the 2024 United Nation Climate Change Conference (COP29), held in Baku, Azerbaijan during November 11-22, reached a consensus on carbon credit creation standards, marking the formal commencement of global carbon transactions.

As of late November, the carbon prices of EU Emissions Trading System (EU ETS) reached €64.64/t, up 6.16% compared to October, reflecting continued growth in market activity.

Outlook

The buy price of CEAs in China is forecasted to be 104.28 yuan/t in December, and the sell prices to reach 109.53 yuan/t, with the median price at 106.91 yuan/t, according to the Research Center of Sustainable Development in Fudan University.

China's Ministry of Ecology and Environment has adjusted the compliance period of the national CEA market from two years to one year, in an effort to further spur the carbon market. This change helps avoid prolonged periods of inactivity due to the two-year compliance cycle and encourages more transactions.

The supply-demand balance in China's national CEA market may gradually stabilize with the end of the compliance period, while carbon prices are expected to fluctuate due to policy uncertainties and the uneven global economic recovery.

China's CEA prices are projected to remain stable or experience moderate fluctuations in December. The trading volumes will drop compared to November, while remaining at a relatively high level.