Positive Developments
Recently, the carbon market has seen a series of positive developments. On January 5, 2024, Premier Li Qiang chaired a State Council executive meeting, where the draft of the "Interim Regulations on Carbon Emissions Trading Management" was approved, bringing great encouragement to carbon trading practitioners in China. The approval of this draft not only means that formal interim regulations are likely to be launched soon but also that the policy guarantees provided by these regulations will have a highly positive significance for regulating market operations and preventing market risks.
Reports indicate that 35% of greenhouse gas emissions in the East Asia and Pacific region have already entered the carbon trading market, ranking the region highest among all. Over the past year, significant progress has been made in the carbon trading field across China and Asia as a whole.
On October 19, 2023, the Ministry of Ecology and Environment, along with the State Administration for Market Regulation, jointly issued the "Measures for the Management of Voluntary Greenhouse Gas Emission Reduction Trading (Trial)," providing an important policy foundation for the operation of the voluntary carbon market (CCER). Following this, on October 24, the Ministry of Ecology and Environment announced the first batch of four methodologies for CCER projects based on these management measures, covering fields such as afforestation carbon sinks, solar thermal power generation, offshore wind power, and mangrove restoration.
Source: World Bank, CDP, FT
In addition, Japan's Tokyo Stock Exchange also launched carbon credit trading in October 2023. South Korea, which has been operating a carbon market since 2015, recently announced plans to reform its carbon market, allowing more financial institutions to participate in carbon trading to enhance market activity.
Beyond domestic carbon markets, carbon emissions control for exported products is also gradually being implemented. On April 25, 2023, the European Council officially adopted several climate-related acts, including the Carbon Border Adjustment Mechanism (CBAM), also known as the "carbon tariff."
Although the European Union has stated that CBAM was introduced to avoid "carbon leakage" during the process of importing goods into the EU market, many opinions argue that CBAM will create trade barriers for other countries. In response, some countries are studying countermeasures, such as establishing equivalent carbon tax policies.
In June 2022, several U.S. senators proposed the "Clean Competition Act," which includes an adjustment mechanism often referred to as the "U.S. version of the carbon tariff," but there has been no further progress on the bill. However, the UK government recently announced that it will establish its own version of CBAM by 2027.
Aside from carbon emissions trading, other forms of climate finance are also experiencing rapid development. On December 8, 2023, the "Notice on Supporting Central Enterprises to Issue Green Bonds" was officially issued by the China Securities Regulatory Commission and the State-owned Assets Supervision and Administration Commission of the State Council. It mentioned support for central enterprises to issue green bonds and to develop industries such as energy-saving carbon reduction, environmental protection, resource recycling, clean energy, ecological protection and restoration, and green infrastructure upgrades.
In February 2023, the Hong Kong Special Administrative Region (HKSAR) government announced the successful issuance of HKD 800 million in tokenized green bonds. Notably, these are not only the first batch of tokenized bonds governed by HKSAR law but also the first tokenized green bonds issued by a government globally.
Against the backdrop of rapidly changing financial markets, Hong Kong views green finance and digital assets as two key opportunities. The issuance of tokenized bonds is an innovative attempt to combine these two trends and could expand the practice scope of green finance. Moreover, in the "Guiding Opinions on Promoting High-Quality Development of New Energy Storage Industry" issued by the Guangdong Provincial Government on March 20, 2023, it was mentioned that the Guangzhou Futures Exchange would accelerate research and the listing of power and carbon emission futures products.