HKEX announced the launch of new international carbon market

On 28 October 2022, Hong Kong Exchanges and Clearing (HKEX) announced the launch of Core Climate, a new international carbon market that will facilitate the trading of carbon credits and instruments to support the global transition to net zero. Participants in Core Climate will be able to source, hold, trade, settle and retire voluntary carbon credits (VCCs) through the Core Climate platform. According to HKEX, VCCs on the platform will come from internationally-certified carbon projects from around the world, including carbon avoidance, reduction and removal projects. All projects listed on Core Climate are verified against international standards, such as the Verified Carbon Standard by Verra.

The launch of Core Carbon is another step towards developing Hong Kong SAR as a regional carbon trading centre, as set out in the preliminary feasibility assessment by Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group published in March this year. This initiative is part of a wider trend in Asia to build out the infrastructure for carbon credits trading and improve liquidity in this market. A well-developed voluntary carbon credit market will be an important tool for organisations to offset unavoidable carbon emissions, in order to meet the net zero targets of the region. While Hong Kong SAR is not the only jurisdiction in Asia looking to develop a carbon trading platform (for example, last year DBS Bank, Singapore Exchange, Standard Chartered Bank and Temasek established a joint venture, Climate Impact X (CIX), to develop a global carbon exchange headquartered in Singapore and other Asian jurisdictions are exploring the same) HKEX’s Core Climate aims to perform a special role in connecting capital with climate-related products and opportunities in Hong Kong SAR, mainland China and globally.

Firms looking to participate in this and other similar platforms, directly or indirectly, will need to carefully review the relevant rules in relation to trading, settlement and custody, and understand their rights and obligations in relation to the VCCs at each of these stages in the trade flow. Linklaters has advised a number of firms on carbon trading platforms, and has experience in advising on licensing implications in the trading of carbon credits, as well as analysing the legal nature of carbon credits in various jurisdictions, including the ISDA whitepaper on VCCs.