Overview
The Hong Kong Stock Exchange, a listed company that also acts a market regular, has set forth its policy direction in emissions trading and commodity markets. Following the completion of a feasibility study in December 2007, the Hong Kong Stock Exchange (HKEx) is seeking to partner with an overseas exchange to build a trading and clearing platform for carbon and other emissions-related products in Hong Kong.
Estimates of the size of the global emissions trading market by 2010 vary from USD40 billion to USD100 billion. Asia has 80% of the Clean Development Mechanism market (CDM, an emission trading system created under the Kyoto Protocol) while China has around 61% market share (by value) in CDM, according to the World Bank. Given Hong Kong’s financial strengths and its proximity to Mainland China, it has the potential to become a global leader in emissions trading.
Best Products/Services
The best prospects for U.S. organizations are: exchange and financial institution partnerships as well as consultancy and project development for environmental and greenhouse gas related transactions.
There are a number of possibilities for U.S. exchange partnerships across a number of categories of bourses including existing major exchanges such as the New York Stock Exchange (NYSE) and the New York Mercantile Exchange Inc. (NYMEX); and newer bourses established solely for the emissions market, such as the Chicago Climate Exchange (CCX).
Opportunitites
The Hong Kong Stock Exchange is considering the adoption of an emissions trading system. Under a typical emissions trading program, a factory or a power plant is issued an allowance by the government for emissions up to a mandated cap. If it does not use all its allowance, the remainder can be sold to other emitters, which would otherwise be fined if their annual emissions exceeded their existing pollution allowances. Corporations began voluntarily trading greenhouse gas emission allowances on the Chicago Climate Exchange in 2003.
HKEx is also considering the possibility of establishing an auction in Hong Kong for Certified Emissions Reduction (CER) units, which are carbon credits generated by Clean Development Mechanism projects. China accounts for the majority (by value) of global CERs generated.
HKEx would also continue to develop existing business (e.g. initial public offerings, Exchange Traded Funds and index-linked products) with a focus on environmental and greenhouse gas markets. This will open several new business avenues in Hong Kong for U.S. service provides, traders, insurance and other financial service firms.
Resources
Hong Kong Exchanges and Clearing Limited
www.hkex.com.hk
For more information about this industry sector, please contact U.S. Commercial Service:
Alice Lai, Commercial Specialist
Email: alice.lai@mail.doc.gov
Tel: (852) 2521-4638; Fax: (852) 2845-9800