THE country’s biggest carbon market plans to adopt a more flexible pricing mechanism to attract more participants to its permit auctions.

    Guangdong is the only one of China’s seven pilot carbon markets that puts a small number of carbon permits on sale through regular auctions.

    Up to 97 percent of emissions permits are allocated to companies in the province for free, but the rest can be bought in the market or through auctions, in a move aimed at putting a price on CO2 emissions.

    However, only 10 percent of the offered volume was sold in the last auction in June, because a minimum price set by the government was higher than the price of permits traded in the market.

    Under a new system to take effect in the first auction of 2015 later this month, authorities will set a benchmark price valued at 80 percent of the weighted average market prices in the three months prior to the auction.

    Guangdong permits traded at around 13 yuan to 19 yuan (US$2.04 to US$2.99) for each of the last three months, well down on a high last June of 88.8 yuan.

    “We expect the benchmark to be about 16-18 yuan,” said an official at the China Emissions Exchange in Guangdong, the trading platform hosting the auctions, who declined to be named because he was not authorized to speak to media.

    The exchange has not yet disclosed how many permits will be available for sale at the upcoming auction but it plans to cut supply in this year’s auctions to 2 million, down from 8 million last year, in an attempt to trigger more interest.

    The auctions are open to licensed financial institutions and the 217 companies subject to CO2 mitigation targets as part of China’s plan to curb its emissions.

    Guangdong has earned revenue of nearly 800 million yuan from auctions held in the past two years, and plans to use the money to invest in low-carbon projects.(SD-Agencies)