China: Beijing ETS looks to develop OTC carbon market

26 March 2014 10:17 Source:ICIS

The Beijing emission trading system (ETS) is developing the over-the-counter (OTC) carbon market that is offered as one of its features, according to a local official.

The Beijing ETS stipulates that covered entities can trade in the OTC market under two conditions: if the transaction takes place between two subsidiaries of the same company, or if the deal’s volume exceeds 10,000 tonnes.

There have been three OTC transactions on the Beijing ETS market since it launched on 28 November in 2013.

The first two deals changed hands on the opening day. The most recent one was on 3 March when 2,217 tonnes of allowances were traded OTC, according to the same official.

A second official said the transaction was done by companies in the local manufacturing industry.

The first two OTC transactions, of 20,000 tonnes of allowances each, fell into the latter category.

Trading carbon OTC in China

The Beijing ETS was the first Chinese scheme to adopt OTC carbon trading. OTC activity is typically less transparent than on the exchange, as details of OTC deals done are not made publicly available.

However, it also means trades can be agreed bilaterally and potentially without incuring additional charges, such as an exchange membership fee, which lowers the cost of trading.

This attracts companies to trade in the OTC market, such as offered by the Beijing ETS, the second source pointed out. Ling Ma

By Ling Ma