Hong Kong deputies to the country’s top legislative body have called for the city to leverage its role as a “super-connector” to enable Chinese mainland enterprises to access the city’s carbon credit trading market, contributing to the country’s next five-year green economic development.
“Continued improvements in the environment” was highlighted as one of the major targets for 2025’s development in last week’s Government Work Report, where the word “green” appeared 17 times.
The year 2025 marks the final year of the 14th Five-Year Plan (2021-25), with the 15th Five-Year Plan (2026-30) set to begin next year. The five-year plans serve as blueprints to steer the country’s economic and social development.
Hong Kong’s voluntary-based carbon market lacks its own authoritative regional standards that could bridge mainland emitters and international carbon emissions trading, said Frank Chan Fan, Hong Kong’s deputy to the NPC.
This deficiency has partly resulted in its scant trading volume, a narrow range of trading products, and inadequate liquidity, failing to meet market demands for “a large-scale, transparent, and regionally influential carbon trading platform”, said Chan, who is also vice-chairman of the Hong Kong Institution of Engineers.
The special administrative region’s bourse operator, the Hong Kong Exchanges and Clearing Limited, launched the city’s first carbon market, Core Climate, in 2022. Its standards build on international nongovernmental organizations’ frameworks, such as the Verified Carbon Standard, one of the most widely used and recognized voluntary carbon standards globally.
The market has yet to publish its transaction volume data officially as it operates through private, over-the-counter deals.
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However, Chan noted a gap between EU carbon credit prices, hovering between 80 euros ($86) and 100 euros per ton, and China’s carbon credit prices, which are sold for less than 100 yuan ($14) per ton, offering significant opportunities for Hong Kong as a “super-connector”.
“If carbon credits from both regions are certified to meet the same standards (in the SAR), why wouldn’t buyers turn to China?” he said, hinting at the potential for Hong Kong’s carbon market that once opened to mainland enterprises would attract international interest.
The mainland operates the world’s largest mandatory carbon market, covering key high-emission sectors like power generation, steel, and cement.
Iris Wong Ping-fan, another NPC deputy from Hong Kong and a member of the Chinese Association of Hong Kong and Macao Studies, said Hong Kong’s carbon market under the “one country, two systems” framework offering renminbi-priced products could strengthen the yuan’s role in global carbon markets, and entrench Hong Kong’s status as the largest offshore renminbi center.
Core Climate now offers both Hong Kong dollar and yuan settlement options for international voluntary carbon credit trading.
Wong highlighted that the validation of carbon credits, or permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases, is crucial. “Hong Kong has both the conditions and capabilities to do this well. The mainland can primarily provide resources and sites, while Hong Kong can take responsibility for certification and marketization,” she added.
Nicholas Chan Hiu-fung, a Hong Kong deputy to the NPC and partner at international law firm Squire Patton Boggs, noted that if mainland carbon emitters were allowed to offset 3-5 percent of their carbon emission quotas with qualified carbon credits offered by the Hong Kong carbon market, it would create a carbon credit demand worth trillions of Hong Kong dollars, rapidly increasing the scale of Core Climate.
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He said, “Hong Kong could utilize its advantages in multi-currency settlement and rule of law to build a trading platform connecting the mainland and international carbon pricing systems. Through exchange rate hedging and designated derivative products, Hong Kong could help mitigate arbitrage risks from price differences, becoming a key node for global carbon asset allocation across markets.”
