China's national Carbon Emissions Allowance (CEA) market outlook for 2024
It is interesting to note that in 2023, the Chinese government began to gradually increase its efforts in decarbonization after putting some measures on hold during the pandemic to prioritize economic stability.
Despite the remaining price gap compared to the European Union (EU) prices, both the trading volume and trading price of Chinese Emission Allowances (CEAs) experienced significant growth.
Although the current national CEA market is limited to the power sector only, both trading volume and trading price of CEAs have grown significantly in 2023, underpinned by regulations that require power companies to fulfill carbon emission targets.
In 2023, the National Carbon Emissions Trading Market in China witnessed an annual transaction volume of carbon emission quotas reaching 212 million tons. This corresponded to an annual transaction volume of 14.444 billion yuan. On average, the daily transaction volume amounted to 875,800 tons.
By December 29, 2023, the cumulative transaction volume of carbon emission quotas in the national carbon market had reached 442 million tons. The cumulative transaction volume in terms of yuan was 24.919 billion. The daily comprehensive price closing price ranged between 41.46 and 81.67 yuan per ton.
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These figures indicate a significant market activity and growing interest in carbon emission trading in China. However, when we compare the average closing prices of China with the EU, there is a massive differential. The average price for China over the 12 months was 79.42 Rmb, or 10.2 Euros, whilst in Europe the average price was 8 times higher at 80 Euros per ton.
This will continue to cause problems for Chinese exporters when facing stricter carbon-based trading regulations in the EU, e.g., the Carbon Border Adjustment Mechanism (CBAM).
While there remains a price gap compared to the EU, the increasing trading volume and price suggest a developing market as the external pressures will further push the Chinese government to pursue its domestic decarbonisation agenda going forward.