Cement firms in China's Hubei seen paying millions to meet carbon obligations
By Kathy Chen and David Stanway BEIJING (Reuters) - Chinese cement firms under Hubei's carbon market will be forced to spend millions of yuan to meet targets as authorities rejected pleas for leniency, but they now have more time to do so after the postponement of Friday's deadline, traders said. Like Hubei, several other domestic pilot carbon markets have postponed deadlines over the past year, testing China's ability to make firms comply with targets and undermining efforts to curb greenhouse gas emissions, in which a planned national carbon market would have a central role. Initially the 138 companies covered by the Hubei scheme, a third of which are cement firms, were supposed to hand over permits by May 31. The deadline was extended to July 10, but 27 companies had still not got enough permits by the end of Friday, the Hubei Emissions Exchange said in a statement. "It will be postponed again because big companies haven't finished trading," said a trader, who did not want to be named as he was not authorized to speak to media. No details were available on a new deadline. The Hubei exchange could not be reached for a comment. Last month, cement firms asked regulators to let them borrow some permits from next year's quota, saying they could not afford to buy permits to cover their obligations for 2014. But their request was rejected, traders said, easing market concerns that big emitters would be let off the hook. Huaxin Cement, Hubei's biggest cement producer, has been under particular pressure over the past few days as it had a shortfall of 1.15 million permits. "Local officials have talked through the consequences of non-compliance with cement factories, so Huaxin approved a 40 million yuan ($6.44 million) budget to pay for permits," said a trader with direct knowledge of the matter. The exchange said Huaxin had met its compliance obligations by the end of Friday's trade. TRADING VOLUMES SURGE Trading volumes on the Hubei exchange surged ahead of the July 10 deadline. The market closed Friday at 25.85 yuan ($4.16), near the day's high of 25.99 yuan. A record 1.17 million permits changed hands. While no details were available on the number of cement producers that complied with targets on Friday, a day ago 26 such firms were struggling to get enough permits. A manager with Gezhouba Cement Group, Hubei's No.2 cement producer, said its permit allocation had been miscalculated. Firms covered by the Hubei exchange are required to buy a maximum of 200,000 permits, regardless of how much they overshot their cap, but Gezhouba has eight subsidiaries in the scheme, raising its total permit demand. "The scheme is punishing big producers but not inefficient competitors," the manager said. "We pleaded with the government to re-issue permits and narrow the gap, but we have not got any reply. How can we spend tens of millions on carbon?" The Hubei exchange had by Thursday traded nearly 17 million permits since its launch in April 2014, representing 55 percent of the nationwide volume. (Editing by Himani Sarkar)
