Latest Developments and Current Challenges in Carbon Markets

【Certified ESG Analyst Insights Sharing】Delton Lau, CESGA

※ What is Carbon Emissions Trading?

The problem of global warming caused by greenhouse gas emissions is referred to as a “negative externality” in economics. It happens when the entities emitting greenhouse gases cause harm to the external environment without paying any compensation, turning the costs that should be borne by individuals into costs borne by society as a whole. Among the gases, carbon dioxide contributes the largest proportion to the problem of global warming, at approximately 25%. Therefore, greenhouse gas trading often uses tons of carbon dioxide equivalent (tCO2e) as the unit of measurement. The objective of greenhouse gas trading is to achieve the “polluter pays” principle by trading carbon emissions rights in the free market. Carbon emissions trading is essentially the trading of greenhouse gas emission rights (emission reduction) based on the “United Nations Framework Convention” on Climate Change. As mentioned in the “Kyoto Protocol”, its aim is to reduce global greenhouse gas emission. 

Currently, there are two major types of carbon markets: Compliance Carbon Markets (CCMs) and Voluntary Carbon Markets (VCMs). CCMs, such as the European Union Emissions Trading System, offer market participants a regulated mechanism for trading carbon emissions allowances. Each allowance represents the permission to emit one ton of carbon dioxide issued by regulatory authorities. On the other hand, participants in the VCMs include buyers of carbon credits, often enterprises. Each carbon credit is usually issued by self-regulated organisations and represents a tonne of emissions avoidance or removal. They can neutralize or offset the buyers’ own carbon emissions. These rights are traded using “carbon credits” as a medium and can be sold multiple times.

※ Are Carbon Markets Becoming “Greenwashing” Markets? 

In May 2023, the World Bank released the “State and Trends of Carbon Pricing 2022”, which indicated that there are 73 active carbon pricing systems globally, accounting for approximately 23% of global greenhouse gas emissions. The global revenue from carbon taxes and emissions trading systems (ETS) reached a record high of around $95 billion. However, the global VCMs still lack well-established global auditing standards and regulations, leading to questions about their authenticity and whether they truly achieve carbon reduction. In January this year, investigations by Germany’s “Die Zeit” and the United Kingdom’s “The Guardian” revealed that over 90% of the rainforest-related carbon credits issued by the key verifying organisation VERRA do not make substantive contributions to carbon reduction. This has led to criticisms that global VCMs are becoming tools for enterprise “greenwashing”.

In view of this, in March this year, the Integrity Council for the Voluntary Carbon Market (ICVCM) announced the 10 Core Carbon Principles. Besides, the Voluntary Carbon Markets Integrity Initiative (VCMI) published the Claims Code of Practice in June. It establishes Silver, Gold and Platinum as three levels of claims. Companies adopting the code are required to make public commitments to achieve science-based net-zero carbon emissions targets by 2050 and set interim goals in respect of the commitments. It is also hopeful that carbon credits certified under these standards will be issued by the end of the year, which will enhance the credibility and transparency of the VCMs.

It is hoped that in the future, countries will further regulate the supply of carbon emissions allowances, encouraging market participants to reduce carbon emissions as much as possible to lower the cost of purchasing carbon emissions allowances. Furthermore, enterprises should first focus on reducing carbon emissions in their production processes, and carbon offsetting through carbon credits should be considered a “last resort” and used cautiously. This is to avoid the risk of misprioritisation where carbon emissions allowances are simply transferred to others who need them, resulting in superficial carbon neutrality and even suspicions of “greenwashing.”





Article is written by EFFAS Certified Environmental, Social, and Governance Analyst (CESGA). CESGA is highly recognized in Europe and globally which has been steadily increasing in the worldwide. If interested in enrolling, please refer to


【ESG分析師洞見分享】Delton Lau , CESGA



現時碳市場有兩種主要類型:合規碳市場(Compliance Carbon Markets,簡稱CCMs)和自願碳市場(Voluntary Carbon Markets,簡稱VCMs)。合規碳市場如歐盟碳排放權交易市場(European Union Emissions Trading System)等為市場參與者提供一個受規管的碳排放配額(Allowance)交易機制,每個配額代表由監管機構發出一噸二氧化碳的排放許可。另一方面,自願碳市場的參與者包括自願減排量(Carbon Credit,又稱碳信用)的買家(通常為企業)。自願減排量由可避免或移除溫室氣體排放的減排項目產生,通常經自我監管組織簽發,可中和或抵消買家自身的碳排放。這些權利以「碳信用」為介質進行交易,而且可以多次出售。


2023年5月,世界銀行發布《2023年度碳定價趨勢與現狀報告》(State and Trends of Carbon Pricing 2022)中指出[1],全球共有73個施行中的碳價制度,約佔全球溫室氣體排放量的23%。全球碳稅和排放交易系統(ETS)的收入創下約950億美元的紀錄新高。但全球自願碳市場仍缺乏完善的全球審計標準與監管,使大眾對其真實性及是否真正達到減碳效果等産生疑問。今年1月,德國《時代週報》與英國《衛報》調查指出,在相關扮演重要角色的驗證組織VERRA,所核發的雨林相關碳權,有90%以上不具有實質的減碳貢獻,令全球自願碳市場面對淪為企業「漂綠」(Greenwashing)工具的批評。

有見及此,今年3月,自願碳市場誠信委員會(Integrity Council for the Voluntary Carbon Market, ICVCM)公佈10項「核心碳原則」(Core Carbon Principles)[2]。叧一邊廂,國際碳權倡議組織(Voluntary Carbon Markets Integrity Initiative,VCMI)於6月份也公佈了《碳權聲明施行守則》(The Claims Code of Practice),除設定銀、黃金、白金三種聲明等級外,採用的公司都需要作出公開承諾,在2050年前實現以科學為基礎的淨零碳排放目標,並就如何達成該承諾設立中程目標[3]。年底前亦有望發行經該標準認證的碳排放權,強化自願碳市場的公信力與透明度。




# 本文章由 EFFAS 環境、社會及管治分析師 (CESGA) 所撰寫。CESGA在歐洲以及全球都具有高度認受性,全球報名人數持續上升。有志報讀的人士,請參閱:

Oct-Nov 2023 Events on Green Finance / 2023年10-11月綠色金融活動一覽

Check out the above calendar for the fantastic green finance events for Oct & Nov 2023! Interested to join and know more about the events? Click the links below for details:


[1] Impact Investing in the Build Environment: Challenges and Opportunities

[2] 7th Annual ICMA & JSDA Sustainable Bond Conference – Accelerating Transition with Sustainable Bonds

[3] Investors on Path to Net Zero

[4] Sustainable Finance Update: Q4 2023

[5] Investing in Times of Climate Change

[6] The Road to COP28: Driving collective climate action across Asia

[7] Quantifying Biodiversity-Driven Risks and Opportunities for Resilient Portfolios

[8] The New Era of ESG and Fintech: Building Sustainable, Digital Financial Systems

[9] BEC EnviroSeries: Financing Climate Transition and Delivering Net-Zero Innovations for Hong Kong

What are the ESG risks banks are facing?

Michele Leung, Green Finance Advisor of Friends of the Earth (HK)

Similar to other corporates, banks are exposed to ESG risk across Environmental, Social and Governance pillars.

A strong corporate governance would support the long-term sustainability and resiliency of the banks. The recent failure of U.S. regional banks like Silicon Valley Bank and Signature Bank indicated there is a lack of risk management expertise on the board, which raised questions on their board oversight. Some research also showed banks in APAC lagged behind their global peers in maintaining the independence of risk committees.

Under social aspects, human capital development and privacy & data security are the two key issues to pay attention to. Especially under current economic slowdown, there is increasingly more employee turnover and scrutiny related to hiring practices and employee benefits.

Among all three pillars, environmental risk stood out as banks are heavily exposed to environmental risks through their lending and underwriting activities, which may lead to reputational and credit costs. Banks should review and mitigate their environmental risks by first understanding their loan book exposure across different environmental intensities, then integrate these into their overall risk framework and oversight, price ESG risks into financing activities or even explore green finance opportunities.

Specifically on climate, many countries ramped up their efforts on climate related banking regulation. Regulators are setting expectation on integrating environmental and climate risk across the bank’s business model, strategy, governance, risk management and disclosure. For example, on the international level, Bank of International Settlement published general principles for climate risk management. In the EU, the European Central Bank conducted a climate risk stress test in 2022 and the European Banking Authority published its final draft Implementing Technical Draft (ITS) on Pillar 3 disclosures on ESG Risks. In APAC, the Monetary Authority of Singapore (MAS) published guidelines on environmental risk management for banks. In Hong Kong: Hong Kong Monetary Authority (HKMA) published the Supervisory Policy Manual (GS1: Climate Risk Management) in Dec 2021, and recently announced the Round 2 of Climate Risk Stress Test (“CRST”).

Carbon footprinting is the fundamental step to measure and understand their exposures, as a next step, banks are asked to use climate scenario analysis in managing their climate risk, for example, HKMA request banks to adopt NGFS scenario and cover different paths including orderly, disorderly, run the assessment from now to 2050. In addition, banks would evaluate physical risk and access their loan portfolio’s regional exposure to chronic and acute risks.

Banks should start preparing now, they are expected to familiarize themselves with local and global regulations as the regulatory landscape is evolving. They should also get ready for Scope 3, an analysis showed financed emissions account for almost 80% of financial institutions’ total carbon footprint. Scope 1/2 and Scope 3 emissions must be disclosed on a best effort basis covering the most relevant sectors. Banks should begin to consider other ESG factors, while the current focus of disclosure requirements is on climate, this will eventually be extended to broaden the scope of quantitative disclosures to other ESG factors (i.e. other environmental issues and biodiversity topics).


【ESG分析師洞見分享】Ryan Fung, CESGA

為了說好金融中心故事,香港政府和監管機構在推動綠色債券上,作風一直都甚為積極。但一直有聲音質疑,這變相是為不少本質上會產生更多碳排放的項目做融資,因為經由綠債融資支持的往往只是基建周邊綠色項目。很少會聽到香港發展負碳排項目,也比較少見會提出一些近年歐美興起的可持續債券(sustainability bonds)。

香港政府最新公佈,至今已發行合共接近 220 億美元等值的政府綠色債券,為多個本地的綠色項目融資。當中募集的資金已全數分配或預留予綠色項目,包括東涌新市鎮擴展(東)區域供冷系統、立體空氣質素監測網絡、啟德體育園,以及更換大帽山風暴探測天氣雷達等。




當年全球第一隻綠色債券於 2007 年由歐洲投資銀行發行,當時市場上並沒有統一的綠色債券標準,政策及市場普遍缺乏有關認知,令綠色債券發展緩慢。直至 2014 年,國際資本市場協會(International Capital Market Association,ICMA)及氣候債券倡議組織(Climate Bonds Initiative,CBI)先後發佈了「綠色債券原則」(Green Bond Principles,GBP)和「氣候債券標準」(Climate Bonds Standard,CBS),明確定義綠色或氣候債券是指任何將所得資金專門用於資助符合規定條件的綠色項目,或為這些項目進行再融資的債券工具,奠定基礎,兼且從制度上推動了綠色債券發展。

可持續債券現時規模仍算小,滙證報告就指出,可持續債券現時市場規模約為 6,500 億美元,大約只是綠色債券市場規模的 3 分之 1。相信再發展下去,未來或許會有更多有關可持續債券的標準衍生出來,比如投資者近日也對國際可持續發展標準委員會(ISSB)發聲,要制定人權和人力資本報告標準。那麼可持續債券未來會否成為發展中國家的「軟肋」,抑或根本搞不起,就有待觀察。

# 本文章由 EFFAS 環境、社會及管治分析師 (CESGA) 所撰寫。CESGA在歐洲以及全球都具有高度認受性,全球報名人數持續上升。有志報讀的人士,請參閱: