China’s climate goals are an opportunity for Hong Kong to develop as a regional carbon trading hub, says finance official

·3-min read

China’s drive to become carbon neutral by 2060 will provide Hong Kong with huge opportunities to develop into a green finance hub and regional carbon trading centre, according to Joseph Chan Ho-lim, the Under Secretary for Financial Services and the Treasury.

The government has been working with local financial regulators and the mainland Chinese authorities to assess the feasibility and policy support required for developing the city as a carbon trading centre for the Greater Bay Area and Asia as a whole, he said. A working group formed by watchdogs such as the Securities and Futures Commission and Hong Kong Exchanges and Clearing will finish a report in December on how to achieve such a goal, said Chan, a former banker.

“International carbon markets are expected to grow significantly as the mainland and other key overseas markets are dedicated to transitioning to a green, low-emission and climate-resilient economy,” Chan told lawmakers on the monthly Financial Affairs Panel on Monday.

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“As an international financial centre, Hong Kong plays a strategic role as the mainland’s gateway to connect international investors to inject capital to facilitate the national carbon neutrality goals.”

Several lawmakers were doubtful, however, about whether the city has the potential to be a carbon trading centre because it has no track record.

China launched its national carbon emissions exchange on July 16 in Shanghai – a key project within Beijing’s efforts to achieve its 2060 target. Carbon trading allows companies that exceed their emissions quotas to offset the difference by buying permits from more efficient companies whose emissions are less than their allocations.

“While Shanghai has started a nationwide carbon trading market, Hong Kong has not yet had any carbon trading. How can Hong Kong be involved in the fast-growing carbon trading market in the mainland?” asked lawmaker Ma Fung-kwok during the meeting.

Chan, however, believes Hong Kong can catch up quickly.

“International investors now cannot invest in the mainland carbon trading market in Shanghai. Hong Kong can explore how to develop itself as a regional carbon trading centre for international investors to trade,” he said.

The study will also explore how Hong Kong can work with other bay area cities in carbon trading. It will assess the city’s potential to develop a voluntary carbon market for international companies and individuals to purchase carbon credits to offset their emissions, he said.

HKEX last month signed an agreement with the Guangzhou Futures Exchange to develop products that can be traded onshore and offshore in Hong Kong by international investors.

“Looking ahead, we will continue to work closely with Greater Bay Area authorities and the industry to enhance Hong Kong’s attractiveness as a one-stop platform by providing the necessary financial services to the [bay area] enterprises in green financing,” Chan said.

China Development Bank’s Hong Kong branch on Monday announced it had successfully issued a US$500 million international green bond on September 2, the first such bond to be sold in the international market by a Chinese policy bank this year. Green bonds are products that raise money to finance environmentally-friendly projects in areas such as renewable energy, clean transportation and pollution prevention.

Hong Kong plans to issue green retail bonds as part of its HK$20 billion government green bond programme, Chan said. There were 108 green or environmental, social and governance (ESG) related bonds listed on the Hong Kong stock exchange at the end of July, worth a combined HK$356.3 billion, he said.

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