After the razzmatazz of its kick-off, the long hard slog begins on Hong Kong’s carbon credits market

Over 400,000 tonnes of credits changed hands in over 40 transactions by 20 participants in November on Core Climate

That was a drop in the ocean compared with the potential: 64.6 million tonnes of emissions from Hong Kong’s 2021 energy use, according to an estimate by BP

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Published: 10:00am, 7 Jan 2023

Asia’s newest carbon credits market launched in Hong Kong to much fanfare last November, when bankers, traders, asset managers and some of the biggest emitters of greenhouse gases were feted at the city’s stock exchange.

“Our ambition is to develop an easy-access, one-stop integrated international carbon marketplace … to expedite the low carbon transition journey at scale in Hong Kong, mainland China, Asia and beyond,” said Laura Cha Shih May-lung, the chairwoman of the Hong Kong Exchanges & Clearing Limited (HKEX), after striking a ceremonial gong to kick off the Core Climate digital trading platform.

The Hong Kong & China Gas Company Limited, the city’s sole provider of piped gas, became one of the first companies to take part on the Core Climate platform, buying 10,000 tonnes of verified carbon units (VCUs) on November 21. For that, the chief investment officer of the company also known as Towngas received a trophy from the HKEX.

Two months after the razzamatazz, the nascent platform is humming, if not exactly roaring. Over 400,000 tonnes of credits changed hands in over 40 transactions by 20 participants in November. That was a drop in the ocean compared with the potential: 64.6 million tonnes of emissions from Hong Kong’s 2021 energy consumption, and 10.5 billion tonnes from mainland China, according to an estimate by the energy giant BP.

Glenda So (right), co-head of markets of Hong Kong Exchanges and Clearing (HKEX), presented a trophy to Hong Kong and China Gas chief investment officer Alan Chan Ying-lung (left), at the launch ceremony of international carbon marketplace Core Climate. Photo: Handout

“The global voluntary carbon market is full of frictions, [such as] the lack of harmonised standards and transparency, [and the existence of] counterparty risks,” Glenda So, co-head of markets at bourse operator Hong Kong Exchanges and Clearing (HKEX), told a green finance conference in early December. “To create a vibrant market, we need a mechanism for price discovery, transparency and investors’ trust on what they invest in.”

The journey ahead to put Hong Kong on the worldwide carbon trading map besides the European Union and North America is arduous and long. For trading to flourish, the ecosystem needs to be strengthened through collaboration with standard setters, verification bodies, registries and regulators internationally, market operators and participants said.