Sep 13, 2021
Today we will be talking about China’s new carbon market, from
the market perspective, with Jeff Huang of AEX, a Hong Kong based
company seeking to create a transparent and neutral forward trading
facility for hedging power and emissions in China. AEX empowers
China power and emissions market participants with market data and
analytical tools, market insight, and by sharing international
trading and risk-management best-practices.
Here are a few things we cover in this episode:
- An assessment of early trading in China's newly launched
national carbon market.
- We hear Jeff's opinion on how benchmark allocation could evolve
into auction-based allocation.
- Jeff discusses clean-dark spreads, which is the difference in
price between the revenue from the power price versus the
costs in terms of fuel (the coal price) plus the carbon
- Jeff talks about the provincial spot electricity market pilots,
in particular Guangdong, and how much traders have to learn to
master these markets.
- We discuss the importance of futures contracts, which are
contracts that obligate the parties to transact an asset at a
predetermined future date and price. We discuss the benefits of
futures in terms of providing market price forecasts as well as
enabling generators to reduce risks.
- We discuss whether carbon markets might evolve to provide a
meaningful long-term signal rather than only a short-term price