Huaneng sets up China's first carbon fund

BEIJING Wed Nov 26, 2014 7:21am EST

BEIJING Nov 26 (Reuters) - State-owned power generator Huaneng on Wednesday set up China's first carbon fund, which will focus on trading carbon permits in the emissions trading scheme in Hubei province.

The establishment of the 30 million yuan ($4.9 million) fund marks another step towards maturity for China's fledgling pilot carbon markets, which will convert to a national scheme in 2016.

"The money will be put in the market very soon. We think Hubei has sufficient liquidity to make some profit," said a fund manager who wished to remain anonymous because he is not authorised to speak to media.

The Hubei market is by far the most liquid of China's seven pilot schemes, with daily trading averaging around 40,000 permits since trading began in February.

Meanwhile, Huaneng's local subsidiary on Wednesday obtained a 300 million yuan loan from the China Construction Bank, using carbon permits as collateral, the second time such a loan deal has been announced.

The Hubei emissions scheme caps CO2 emissions from some 140 power generators and manufacturers. They receive most of the permits they are expected to need for free, but those that emit more than covered by their permits must buy additional allowances from the market before a compliance deadline in May each year.

(1 US dollar = 6.1386 Chinese yuan) (Reporting by Kathy Chen and Stian Reklev; Editing by Mark Potter)


Reuters

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