China Takes Steps Toward Carbon Futures Trading in Guangzhou

LI JUN

(Yicai Global) May 15 — China’s financial authorities explore launching the country’s sixth futures exchange, the first one in southern China, expected to be first dealing in carbon emissions.

Via the new exchange, qualified institutional and individual investors should be first allowed trade carbon emissions in Guangzhou in the Chinese currency or foreign ones, according to the guidelines that the State Council released yesterday. Companies trade such credits to stay within their limits of carbon dioxide emissions.

The plan has been in the works for long. In October 2011, Chinese regulators approved pilots for carbon emissions trading in cities, including Guangzhou, Beijing, Tianjin, Shanghai, Chongqing, and Shenzhen.

The proposed bourse could also consider developing commodity index futures as it needs to differ from the other future exchanges in China, industry insiders told Yicai Global.

Because carbon emissions futures don’t require physical delivery, setting up rules for trading should be feasible, an executive, who works for a renowned futures trading firm in Shenzhen, told Yicai Global. That also goes for commodity index futures, the person who wished to remain anonymous added. “But further discussion is needed on how to make the market busy.”

China’s mainland already has five futures exchanges: three in Shanghai, one in Henan’s Zhengzhou, and one in Liaoning’s Dalian. These cover agricultural, industrial, and financial products.

Editor: Emmi Laine