context: Unperturbed by the delays and low trading on the national carbon market, Hong Kong’s stock exchange has established Hong Kong International Carbon Market Council. Experts are hopeful that Hong Kong will be able to position itself as a global centre for carbon trading, and potentially drive international capital into China to support carbon reductions.

Trading on the national carbon market remains sluggish, while Hong Kong is well positioned to become an international centre for carbon trading, according to comments made at Caixin’s China ESG30 Summer Forum on 10 Jul 2022.

National carbon market trading has been sluggish in 2022, with Q2 prices hovering at around 59/tonne, explained Zhang Xiliang 张希良 carbon market chief architect. Zhang confirmed that carbon quota auctions and adding additional industries to the market are unlikely to occur in its second compliance period, citing the grave state of the economy and insufficient power market reforms.

Zou Ji 邹骥 Energy Foundation China president urged establishing more connections between the carbon market and capital and financial markets to stimulate trading.

Hong Kong can act as a bridge between China and developed markets, especially for voluntary carbon markets, argued Ashley Alder Hong Kong Securities and Futures Commission chief executive. Alder advocated for Hong Kong to set and implement standards for voluntary carbon markets, enabling international funds to flow into China for green projects and carbon offsets.

Ma Jun 马骏 Hong Kong Green Finance Association chairman and president concurred with Alder, stating that a voluntary carbon market in Hong Kong would have the potential to become the world’s biggest. Ma believes that Hong Kong can help to better allocate funds in the national carbon market, supporting carbon reductions in both Hong Kong and mainland China. He recommends two priorities for Hong Kong’s carbon market

  • incorporating Hong Kong into a Greater Bay Area carbon market
  • allowing international participation in China’s compulsory carbon market
    • he is optimistic about the short-term prospects for international participation in Guangdong’s carbon market, and potential participation in the national carbon market in the long-term