caalley logo

The alley for Indian Chartered Accountants

Hong Kong exchange carries out first carbon credit trades

Hong Kong, November 24, 2022

The Hong Kong stock exchange has carried out the first batch of carbon credit trades on its new voluntary carbon market, joining a handful of Asian exchanges in tapping opportunities resulting from governments' push to achieve climate goals.

The inaugural trades on Hong Kong Exchanges & Clearing's (HKEX) Core Climate platform announced on Thursday spanned carbon credits from more than 30 international projects involving around 20 participants, the exchange said.

The trades were completed between Oct. 28 and Nov. 24, according to a draft press release seen by Reuters.

A carbon credit or offset permits the buyer to emit one metric tonne of carbon dioxide or equivalent greenhouse gas.

"The HKEX plays a key role in supporting Hong Kong's rise as a green, low-carbon financial market," Christopher Hui, secretary for financial services and the treasury, said at the debut ceremony.

Participants in the inaugural trades included Bank of China (Hong Kong) 3988.HK, BNP Paribas BNPP.PA and CLP Holdings 0002.HK.

The HKEX's platform allows for both yuan and Hong Kong dollar settlement, which is different from Climate Impact X, the voluntary carbon market backed by Singapore Exchange Ltd (SGX) SGXL.SI, Temasek, DBS Bank DBSM.SI and Standard Chartered Bank STAN.L, whose credits are traded in U.S. dollars.

Exchanges in Hong Kong, Singapore and Malaysia have in recent years raced to establish their voluntary carbon markets in response to their governments' push for carbon neutrality, or a state of balancing emissions of carbon with its removal.

Singapore's Climate Impact X completed its pilot auction in November 2021. That trade involved 170,000 carbon credits from eight global projects and 19 buyers.

Bursa Malaysia has said its voluntary carbon market would start trading by end of this year.

Corporates in Asia are warming up to the green agenda but some have not yet started trading carbon credits due to a lack of well-established channels, said John Thang, Standard Chartered’s head of financial markets in Hong Kong and Greater Bay Area.

"We are also planning to participate in the platform as a trading counterparty," Thang said.

China started a national emission trading scheme in 2021 with a dedicated exchange in Shanghai. It has committed to achieving peak emissions before 2030 and net zero by 2060, and is the largest carbon market in the world by volume.

Chinese project owners might see the benefit of listing their carbon credits in Hong Kong, where projects are verified under international standards, said Jason Tu, co-founder and chief executive of MioTech, a sustainability data provider.

"But a successful voluntary carbon market would also need participation by a wide array of carbon credit buyers, including both global financial institutions and corporate users, such as oil and gas companies," Tu said.


Read more on:
Don't miss an update!
Subscribe to our newsletter