Hong Kong Explores Role in Chinese Carbon Market

Hong Kong is exploring opportunities to establish a unified carbon market in the Greater Bay Area, leveraging the Guangdong ETS and Shenzhen ETS.

Hong Kong is reportedly exploring ways of collaborating with neighbouring Chinese regions to establish a unified carbon market in the Greater Bay Area (GBA).

The Standard reports that Hong Kong is planning to establish a unified carbon emissions trading market in Guangdong, Hong Kong, and Macau to attract foreign investors.

However, transactions are said to be comparatively few due to a lack of foreign investors and futures products, according to Grace Hui, head of Green and Sustainable Finance at Hong Kong Exchanges and Clearing (HKEX).

Hui reportedly told a panel in Shanghai that it is hard for Hong Kong to develop a carbon trading market on its own without taking reference of Shenzhen’s experience in developing a unified market for Guangdong, Hong Kong and Macau.

Last month, HKEX and the Guangzhou Futures Exchange (GFEX) signed an MoU agreeing to cooperate in promoting sustainability and facilitating the development of the GBA. HKEX CEO Nicolas Aguzin said the work with GFEX would include the development of a green and low-carbon market in the region.

When the GFEX launched in April, it cited plans to explore and develop carbon futures, electricity futures, climate-related products, commodities index futures and other “green-linked” commodities.

Meanwhile, The Asset reports that Hong Kong is seeking a role in the development of China’s carbon market by leveraging its capabilities as an international financial centre.

The opportunities for Hong Kong are said to lie in its access to two regional carbon trading markets, the Guangdong emissions trading scheme (ETS) and the Shenzhen ETS, which are part of China’s national ETS launched in July 2021.

“We will actively explore new opportunities to drive the development of a green and low carbon market in the region and both exchanges will work together in areas such as clearing, technology, and collaborate on marketing and investor education efforts,” Hui said.

“We are a tiny, low-carbon market which will not have enough liquidity. So we’re looking to tap into the Greater Bay Area and work with the two regional ETS in Guangdong and Shenzhen to see whether we can allow our listed companies, for example, to participate in the carbon trading markets there.”

HKEX along with the Securities and Futures Commission (SFC) and Hong Kong Monetary Authority (HKMA) are part of the Green and Sustainable Finance Cross-Agency Steering Group in Hong Kong, which is formulating an overall plan that will determine what role the city can play in the development of China’s carbon trading market.

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