Six companies in the Ningxia Hui autonomous region have been fined a total of 168,000 yuan ($25,380) for failing to purchase carbon emission allowances on time as required, according to the region's environmental authority.

Thirty-five companies in the region are involved in the national carbon trading program, which currently only concerns the power generation sector. As the market wrapped up its first cycle of trading last year, nearly 8.6 million metric tons of carbon emission allowances changed hands in the region, the authority said in a recent media release.

Carbon trading is the process of buying and selling carbon emission permits among designated emitters. The program imposes carbon emission limits for every unit of electricity a power plant generates. After each cycle of trading, operators will be able to sell their carbon allowances if the emission intensity of their plants is below the bench mark. Otherwise, they will have to purchase allowances.

Currently, the allowances are distributed to participating emitters free of charge.

The penalties to the six companies, which include Ningxia Baofeng Energy Group and Ningxia Risheng High-tech Industry, were made in accordance with a regulation on carbon emission trading for trial implementation, which was unveiled by the Ministry of Ecology and Environment in early 2021, it said.

The regulation rules that companies will be fined 20,000 to 30,000 yuan if they fail to purchase carbon emission allowances on time.

The Ningxia environmental authority also said the six companies' allowance allocation will be reduced for the second trading cycle.

As the trial implementation was only a regulation issued by the ministry, the penalties for carbon trading violations aren't great. The country, however, has been accelerating efforts to draft laws and regulations at the State level that will lead to larger penalties.

China launched its national carbon trading market last year. Involving 2,162 power generators, which are responsible for 4.5 billion tons of carbon dioxide emissions, the program is already the largest in the world.

More smokestack industries are expected to be included into the market soon.