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China’s carbon neutral goal
BusinessBanking & Finance

Guangzhou exchange kicks off, offering a hedge for carbon emissions trading in China’s 2060 climate change goal

  • CSRC head will guide Guangzhou Futures Exchange to develop green products including carbon emission futures
  • The scale of trading in the voluntary carbon offset market is currently around US$320 million, CME says

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Residents walk across the frozen Songhua River in front of smoke stacks at Jiamusi, in China’s northeast Heilongjiang province on December 4, 2005. Photo: AP
Enoch Yiu
The Guangzhou Futures Exchange has formally kicked off the process of developing emissions derivative products, putting a vital pricing mechanism into place to spur China to meet President Xi Jinping’s goal of attaining carbon neutrality by 2060.
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The exchange, officially opened on Monday by Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC) in the Nansha district of the Guangdong provincial capital. The exchange is the fifth financial market place in China for trading futures.

“The CSRC will lead the Guangzhou Futures Exchange to develop products, systems, and innovative technology to establish a futures market that can serve the real economy and green development,” according to an article in the state-owned Guangzhou Daily newspaper, posted on the Guangzhou government’s website, adding that carbon emissions futures, climate-related products and commodities index futures would be considered.

The market place, in which Hong Kong Exchanges and Clearing Limited (HKEX) owns 7 per cent, would be the next step in the financial infrastructure build-up to help the world’s second-largest economy go green. The futures contracts would augment and help traders hedge against risks in the nascent financial product, as a nationwide platform for trading carbon emissions spot contracts is expected to commence at the end of June.
Guangzhou Futures Exchange, a newly established bourse which Hong Kong Exchanges and Clearing owns a 7 per cent stake, is actively studying launching carbon emission futures products, marking a major step forward for the nation to use financial tools to help industry players to cut down pollution. Photo: Weibo
Guangzhou Futures Exchange, a newly established bourse which Hong Kong Exchanges and Clearing owns a 7 per cent stake, is actively studying launching carbon emission futures products, marking a major step forward for the nation to use financial tools to help industry players to cut down pollution. Photo: Weibo

“Carbon emission-related derivatives should be introduced so that risks can be fully reflected in the prices of trading carbon-emission products,” the Chinese central bank governor Yi Gang said during an April 15 webinar with the International Monetary Fund (IMF).

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Carbon emissions futures are new in China, helping the world’s largest emitter of carbon dioxide and other greenhouse gases catch up with similar financial instruments in the United States and the European Union. Xi surprised the world last September when he announced at the United Nations China’s 2060 goal, becoming only the second major economy after the EU to put a date on the ambitious target.
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