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CN Markets: CEAs remain rangebound, CCER trading volume plunges amid limited supply

Allowance prices in China’s national emissions trading scheme remained stable over the past week despite the update on the long-awaited allowance allocation plan, while the offset market saw a plunge in trading volume amid severely limited supply due to policy uncertainty.

Spot Carbon Emissions Allowances (CEAs) closed Thursday on the Shanghai Environment and Energy Exchange at 58 yuan ($8.16), with prices sticking to the range of 57.70-58.20 yuan throughout the past week, exchange data showed.

Despite the latest update on allowance allocation, the long lead-time to the next compliance deadline – which has been set at Dec. 31, 2023 – has inevitably tempered the market response to the draft, observers said.

In addition, doubts remain as to how the Ministry of Ecology and Environment (MEE) will solve the lasting oversupply issue and allow emitters to carry forward unused permits for 2019 and 2020.

According to the draft, the regulations for carrying forward unused permits will be announced by the MEE separately, and “soft management” will be done to reduce the pressure for emitters to meet compliance if necessary.

“While plenty of big power plants still have significant CEA surplus, they might prefer to hold on and wait for more policy clarity,” one observer noted.

LIMITED CCER SUPPLY

Meanwhile, the offset market saw its liquidity reach its lowest levels in over two years, with only around 9,400 Chinese Certified Emissions Reductions (CCERs) trading across all platforms, down from 32,000 units the previous week.

The majority of CCERs were traded on the Tianjin bourse, exchange data showed.

“The drop in trading volume was more or less expected, as most of the offsets in the market have been consumed for compliance … not many units are left in circulation,” one analyst said.

Demand for CCER credits is thought to be highly associated with allowance allocation in the Chinese compliance market, given that regulated entities under the ETS are allowed to use the credits against up to 5% of their annual verified emissions.

Little is known about what the Chinese offset market will look like going forward and which project types will be eligible in the future, though the environment ministry has said it would prioritise CCERs from sinks, methane utilisation, and renewable energy.

The national offset programme has been suspended since 2017. No CCER projects, methodologies, or issuances have been approved since then.

“That means it’s difficult for market participants to make predictions on the supply side, even though demand is generally expected to continue growing in the coming years,” the analyst said.

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Ex-head of Nigerian bank’s UK unit was arrested in bribery probe

The head of the London branch of a Nigerian bank in which Bob Diamond’s investment fund has a sizeable stake was arrested last year on suspicion of bribery.

Maurice Phido, the former chief executive of the UK unit of Union Bank of Nigeria, was arrested by the National Crime Agency on suspicion of bribery, according to three people familiar with the investigation.

Since his arrest last year, Mr Phido has returned to Nigeria, one of those people added. He has not been charged with any offence.

Nigel Kirby, deputy director of the NCA’s economic crime unit, said in a speech earlier this week that the agency had arrested the London head of a foreign bank but did not identify the suspect. He added that the NCA, after a seven-month investigation, had passed the file to the Crown Prosecution Service to weigh charges.

The NCA declined to comment, but one person familiar with its case work confirmed that there were no other files relating to bank chief executives.

The biggest investor in UBN is Atlas Mara, the London-listed investment fund founded and chaired by Mr Diamond, the former chief executive of Barclays. Atlas recently lifted its stake in the Nigerian bank to 49 per cent and is expected to become the majority shareholder later this year.

A person familiar with the matter said Mr Phido had been arrested in the UK on a matter that was not directly related to UBN and his case had not been discussed by the bank’s board of directors.

The person said Mr Phido no longer worked for UBN, adding that his arrest did not imply any wrongdoing by the bank, which ranks among Nigeria’s ten biggest lenders.

Another person familiar with the investigation said it began over allegations that a client had paid the school fees of another employee’s children, and accusations that false invoices were sent out. The probe then expanded into other areas.

UBN traces its roots back over a century and was once owned by Barclays, which acquired the lender then called Colonial Bank in 1925. Any link with the UK bank ended after the Nigerian lender was separately listed and then part-nationalised in the 1970s.

The Nigerian bank said in an emailed statement: “Union Bank UK would like to state that it has not been nor is the bank currently the subject of any bribery investigation.” It added that Mr Phido no longer works for the bank.

Atlas Mara and the NCA declined to comment.

According to the register of the UK’s financial watchdog, the Financial Conduct Authority, Mr Phido’s authorisation to be chief executive of Union Bank UK lapsed in May 2017.

An employee of the bank’s headquarters in Lagos confirmed that Mr Phido was no longer in his position and that he had left.

No response to a message seeking comment sent to Mr Phido through social media was received and details of his lawyers could not immediately be located.