China’s new Guangzhou exchange focuses on carbon futures

The exchange will develop carbon futures products that are expected to be priced in RMB and foreign currencies, and offered to qualified foreign institutional investors, domestic institutional and retail investors, according to a report.

It said the GFEX will explore introducing electricity futures, climate-related products, commodity index futures and other unspecified "green-linked" commodities,

John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “With China’s net zero targets and ambitions now well-articulated, we can anticipate the various provinces in China will be implementing the policies required to deliver on those targets and ambitions. Within the Greater Bay Area (GBA), there is significant scope for green linked products given the level of industrial and high-tech activity within the GBA. Together with the proximity to Hong Kong and coupled with Hong Kong’s ambitions to be a leading green financing hub, the GFEX should be able to capitalize on the capital availability in the GBA.”

“The ability of the GFEX to appeal to foreign investors will however very much depend on the convergence of green taxonomy globally. We are of course already seeing some convergence of China’s green taxonomy with current standards elsewhere, such as the removal of clean coal from the definition of green. The Common Ground Taxonomy that the EU and China are working on should also facilitate the commonality that would be required,” he said.

The exchange is owned by Hong Kong Exchanges and Clearing, Ping An Insurance Group, China’s four other futures exchanges, Guangdong Pearl River Investment and Guangzhou Finance. It was approved by the China Securities Regulatory Commission (CSRC) in January.

China in September 2020 announced its goal to have carbon emission peak by 2030 and achieve carbon neutrality by 2060.