China: Tight allocation leaves companies short in Hubei ETS

07 April 2014 11:05 Source:ICIS

The Hubei carbon market is already tight, after the allocation of allowances by government has left some companies short. Companies in the local chemicals and cement sector have already voiced dissatisfaction with the perceived underallocation, a local government official said on Wednesday.

A new project is expected to double the output of chemical company Sinopec‘s Wuhan branch this year, for instance, but the government has declined to give the company additional allowances to cover the associated emissions, according to its director. Sinopec is the biggest Chinese oil and gas company.

The local branch of petroleum company CNPC has also protested against the level of allocation and is still seeking allowances, according to a director of a local carbon evaluation company. CNPC, the second biggest Chinese oil and gas company, was unavailable for comment.

Cement companies Huaxin and Gezhouba are the most vocal advocates for additional allowances to be handed to the sector, according to staff at the same carbon evaluation company. Both companies were also unavailable for comment.

The Hubei government, however, has remained firm in resisting to hand out additional allowances, according to the same official.

“If we [give in] to one company, then others will follow, and the whole carbon trading mechanism will become useless, ” he said.

The Hubei government has 25.92m allowances in reserve, according to an unpublished internal document seen by ICIS.

The local government will consider giving additional allowances from this reserve to compliance companies that launch new product lines, according to the document. However, it won’t give additional allowances to companies simply to keep costs low while increasing output. Ling Ma

By Ling Ma