ESG and Green Finance Forum cum Recognition Ceremony 2022
| Plato Yip, Chairperson of Friends of the Earth (HK)
The Hong Kong Economic Times
organised the "ESG and Green Finance Forum and Award Ceremony 2022"
on 27 October 2022, bringing Hong Kong's policy makers, corporate finance practitioners,
and investors together to discuss a topic that is vital to global social and
Mr. Plato Yip Kwong-to (Chairperson
of Friends of the Earth (HK)), Dr. Stephen Wong Yuen-shan (Senior Vice President
of Our Hong Kong Foundation and Executive Director of Public Policy Institute)
and Mr Johnny Yu Ching-yan (Advisor to Chairman of Henderson Land Development
Co Ltd) were invited to be the guest speakers in the panel discussion
"Leading the Wave of Carbon Trading: Present and Prospect" to share
their valuable experience and insights on green finance.
The Importance of Accuracy in
Regarding carbon trading,
Friends of the Earth (HK) believes that establishing an effective carbon
trading platform and mechanism is particularly important to achieve the goal of
carbon neutrality and net-zero emissions. As carbon credits are used in carbon
market transaction, its effectiveness depends on two factors: 1) high standard
of carbon credits and 2) data consistency and integrity. The biggest challenge
lies in ensuring the openness, transparency and immutability of all carbon
credit measurements from the moment of generation, along with an effective
monitoring and validating process that facilitates its eventual transference to
the carbon trading platform.
At present, carbon credit
transactions are mostly executed over-the-counter. This does not pose a huge
issue for bulk trading, but its high cost has regrettably put off some small
and retail investors. An effective and convenient carbon trading mechanism and
an effective trading platform is therefore vital.
The Global Rise of Carbon
More and more companies around
the world are bringing forward timetables for their net-zero commitments, but
they still require carbon credits to achieve this net-zero transition. The
International Carbon Action Partnership (ICAP) publishes reports on the recent
development of global carbon market every year. The latest report in 2022
indicates a rise in global carbon market maturity and expansion in market
scope. Economies with carbon market mechanism account for 55% of global GDP,
and carbon markets cover 17% of global greenhouse gas emissions. According to
the "Carbon Pricing 2021" report, carbon pricing instruments raised USD
53 billion in 2020.
China’s Ever-expanding Carbon
As the world's largest carbon
emitter, China also has the largest carbon market in the world. On 16 July
2021, China launched the nationwide emission trading scheme (ETS). The first phase covered the power
sector—comprising over 2,000 power generation enterprises and captive power
plants—with annual carbon emissions reaching 4 billion tonnes. Since the
official launch last year, cumulative carbon transactions in China reached 179
million tonnes, with an accumulated turnover of over RMB 7.6 billion.
The second phase will cover
large firms in seven additional sectors: petrochemical, chemical engineering,
building materials, iron and steel, dyeing and finishing, pulp and paper, and
aviation. If all the above are included, the number of emission control
enterprises will reach 8,000-10,000, covering an estimated total annual carbon
emission of 8 billion tonnes and accounting for approximately 70-80% of China's
Hong Kong’s Role in the Carbon
The Hong Kong government should
seize the opportunities in China to promote the development of local carbon
market--the voluntary carbon markets (VCM) in particular--and explore
integration with the carbon market in the Guangdong-Hong Kong-Macao Greater Bay
Area. This enables enterprises to better prepare for the environmental cost and
opportunities arising from climate change, thereby accelerating low-carbon
transformation. We should put emphasis on voluntary carbon trading market and
build a diverse, high-quality and multilateral trading system.
VCM is an important complement
to mandatory compliance markets. Generally, participants are companies that
wish to fulfill their corporate social responsibility. These
companies reduce or offset carbon emissions from their business operations by
purchasing carbon credits. Between 2019 and 2021, the market has grown by more than 60%
annually. In 2021, the trading volume of the global VCM exceeded USD 1 billion
for the first time, and the price of high-quality carbon credits often reaches
USD 30-50 per ton in the global market.
According to forecast from the
Taskforce on Scaling Voluntary Carbon Markets (TFVCM), if the world were to
halve emissions from current levels by 2030 and become net-zero by 2050 to
achieve the Paris Agreement goals, the current market would need to scale up by
15 times compared to 2020, and expand by 100 times by 2050. Facing the
opportunities of the carbon trading market, the Green and Sustainable Finance Cross-Agency
Steering Group recently published its preliminary feasibility assessment on
Hong Kong carbon market’s
opportunities, and the report supports the development of Hong Kong as a
regional carbon trading hub.
We believedigital integration of the carbon chain would allow low-carbon
technology, carbon trading and green finance to form a closed loop with the
real economy. Through establishing
an effective carbon trading mechanism, we can foster the development
of low-carbon technologies and financing means, bringing in new growth for green finance in the Greater Bay Area
(GBA) and Hong Kong.
Gathering Expertise to Secure Opportunities
has become a buzzwordrecently, and Hong Kong's cooperation with the Mainland also requires lots of talents in carbon
trading. As an emerging industry, professionals in the field of finance, innovation and technology, and environment
are all in great demand. Friends of the Earth (HK) proposes to launch a pilot
scheme in the GBA, working together with experts in related industries to
accelerate Hong Kong’s fintech and green finance transformation. With
the support of China and
the GBA, it constitutes a new economic
growth point with absolute advantages that enables Hong Kong to compete with Singapore.
Hong Kong should definitely seize this opportunity.
transformation process needs cross-departmental and multi-disciplinary talents.
We need financial expertise to design carbon credit tradable products; we also
need professionals in environmental and low-carbon technologies to address the
potential supply and demand of various industries, and generate verifiable and certifiable
carbon credits. Meanwhile, innovative technology and blockchain experts can
help to foster automated capturing of carbon credits using IoT technologies
when they are generated, utilising the blockchain technology to ensure accurate
carbon credit data flow to the market. The ultimate goal is to find a way that
can constantly provide high quality and high value carbon credits for trading.
By leveraging the power of the capital market and Hong Kong’s role as an international
financial center, this will empower Hong Kong and GBA to achieve the dual
carbon goals and realise sustainable development in a low-carbon economy.
ahead, Friends of the Earth (HK) will continue to work together with relevant industries and
respective stakeholders to promote Hong Kong as an important hub for green
and sustainable finance. We look forward to the prosperous development of carbon trading
market, and hope
to see more businesses
join us on the journey towards a carbon-free future!