(Bloomberg) -- China’s state-owned power giants have been asked to prepare reports on historical emissions that officials will use to set up the world’s largest carbon market, according to people familiar with the request.
The China Electricity Council has asked firms for submissions by July, said the people, who asked not to be identified because the information isn’t public. The council will use the data to help determine the number of carbon allowances power generators can vie for when the market launches.
The Ministry of Ecology and Environment, which will oversee the market, published a draft allocation plan last year after consulting with the council. It has since decided that the data wasn’t accurate and has asked for it to be redone with direct input from the utilities, according to the people. Officials at the ministry and at the council, an industry group representing power generators, didn’t return calls seeking comment.
China’s biggest power generators include China Energy Investment Corp., China Huaneng Group, State Power Investment Corp. and China Datang Corp. Emails sent to company officials requesting comment on the submissions were not immediately returned Thursday.
Greenhouse Gas
China is aiming to set up a national carbon market this year to cover the power sector, which accounts for half of the fossil fuel-derived emissions in the country and 14% of the entire world’s. The exchange in Shanghai that will host the market recently completed testing on the electronic platform that will trade the emissions.
The world’s top energy consumer is tapping financial market mechanisms to help cut greenhouse gases, a move expected to create the world’s biggest forum for trading carbon emissions. The program will force utilities to buy permits to pollute, and so help counter the impact of rising electricity usage on efforts to contain global warming.
The emissions allowances will be key to the market’s success -- and a likely source of contention. The government will essentially give power generators permits to spew-out a certain volume of greenhouse gases, and then the companies will be free to buy or sell them on the open market.
If the initial allowance is too high, then the permits will be cheap to obtain and will offer little incentive to generators to reduce emissions. Too low, and the cost of the permits will be a financial drag on the utilities, just when China needs cheap power to help buttress growth as it recovers from the coronavirus.
Analysts have speculated that the market’s launch could in any case be delayed by disruptions related to the pandemic. The council’s request coming so late in the year doesn’t bode well for getting the market up and running in time to affect 2020 emissions, according to the people.
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