Mostafa Monira Firdouse, Green Finance Advisor of Friends of the Earth (HK)
The price of solar energy has been dropping past few years. In contrary, energy crisis is increasingly becoming the main topic more than a year in the world. In my view, both demand and supply situation are working hand in-hand, playing a catalytic role towards to ENERGY TRANSITION (my passion!).
However, we should remember that the ‘INVESTOR’S INTEREST’ is the key element to make this RE evolution as a successful drive.
Following an unprecedented energy crisis last year due to the reduction, the European Union is expected to diversify away from fossil fuels at a faster pace. The region is estimated to add a record-breaking 41.4GW of solar power in 2022, 47% more than the previous year, and another 53.6GW in 2023 to bring total solar capacity to 262GW, which represents over 280 organizations across the entire solar sector on the continent. The reduction in solar panel prices by Chinese manufacturers is expected to stimulate demand globally, particularly in Europe.
Perfect time to refocus on Voluntary Carbon Market (VCM)
As more businesses and individuals begin to invest in solar power, production rates have increased, resulting in lower prices. Furthermore, as more countries become aware of the economic and environmental benefits of solar energy, they have begun to offer incentives, such as tax credits and subsidies, to encourage the adoption of solar energy. This has led to more people and businesses investing in solar energy, further driving the prices down. VCM nears 500 million credits traded in 2021, quadrupled to nearly $2B.
The demand for carbon credits is expected to increase exponentially, especially driven by the surge of corporate climate pledges that will boost activities in the voluntary market. As of November 2022, over one-third of the world’s largest publicly traded companies have announced net-zero targets. These companies are set to use carbon credits they purchase to offset emissions that are hard to completely abate, alongside actions to decarbonize their emission activities. The voluntary market has already topped $1 billion in 2021, and the global demand for voluntary credits is forecasted to increase by a factor of fifteen by 2030, reaching1.5 to 2 gigatons per year.
Challenges
Carbon credits market is a dynamic, complex system and so the pressure is high when it comes to its governance. But governing carbon markets can be tricky. Setting an appropriate carbon price for renewable energy is an important step to encouraging investment and adoption of renewable energy technologies. The higher the price, the more expensive it is to emit these gases, and the more incentive people have to switch to renewable energy sources. Its success will depend on how well market integration and governance will be implemented by initiatives such as the Taskforce or the VCMI. Even more importantly, VCM’s triumph is reliant on the credibility of each and every one of its participants: standards, offset project proponents, traders.
Core Climate
Hong Kong Exchanges and Clearing Limited (HKEX) celebrated the first four weeks of trading on Core Climate, Hong Kong’s new international carbon marketplace. Since Core Climate launched on 28 October 2022, it has generated significant momentum for voluntary carbon trading in the region. The platform recorded more than 40 trades in less than a month between 28 October and 24 November 2022, representing a total volume of around 400,000 tonnes of carbon credits.
Leveraging Hong Kong’s status as a champion of international standards, a facilitator to channel global capital into the Mainland and an international financial center, looking forward to seeing a stable and mature regulatory system to capture impact of energy transition. Developing Hong Kong into a regional carbon trading center.
References：
https://www.hkma.gov.hk/media/eng/doc/key-information/press-release/2022/20220330e3a1.pdf
