China's Guangdong to allocate 408 million carbon permits this year

BEIJING (Reuters) - China's biggest carbon market in Guangdong province will allocate 408 million carbon permits to firms to help them comply with emission targets set for the trading year ending in June 2016, the same amount as the previous year. A total of 186 companies will be granted 370 million carbon permits, which currently trade at a price of 15.52 yuan, down 74 percent from the market's launch one and half years ago, showed a statement from the China Emissions Exchange in Guangdong on Monday. The local government will set aside the remaining 38 million permits for 31 market entrants, and 2 million permits from reserves to be sold during quarterly auctions. The amount of the permits for auction is down from 8 million the previous year, but the government will authorize the exchange to increase the amount if necessary. Regulators have the power to offer more permits and increase the number of auctions to ease shortages or tackle irregular price fluctuation, the statement read. The Guangdong exchange covers firms from four major industries in the region, including coal-fired power, steel, petrochemicals and cement. Firms will be allocated as much as 95 percent of their permits for free. They can choose to take part in the quarterly auctions, but new entrants are obliged to buy permits either from the auctions or the secondary market to cover the charged amount of emissions from new production facilities before they can start operations. Guangdong is the only one of China's seven pilot carbon markets to hold regular auctions. It set a minimum bidding price of 60 yuan per permit in 2013. Last year, prices began at 25 yuan and were raised by 5 yuan at each subsequent auction. The auction price floor has been abolished this year to stimulate the secondary market, the exchange said. (Reporting by Kathy Chen and David Stanway; Editing by Christopher Cushing)