Opportunities and Threats from Emission Trading Scheme (ETS) in Hong Kong & China

Carbon Emission Trading Scheme (ETS) is getting popularity as a market mechanism carbon reduction policy in many countries including Mainland China.  ETS is defined by setting a definitive carbon emissions cap on capped entities and the use of emissions allowance credits and other permitted tools to meet their carbon reduction compliance obligations. Allowance credits may be obtained through trade. As a result of the supply and demand of allowance credits, an ETS establishes a market price for carbon emissions, which in principle will help capped entities discover the least-cost option to carbon emissions reductions.  To date, a total of 18 carbon ETSs are in force globally - the eight pilot ETSs in China, the European Union (EU), Switzerland, Tokyo, Saitama, South Korea, New Zealand, California, Regional Greenhouse Gas Initiative (RGGI), Ontario and Québec. This covers a total of approximately 4,755 Mt of carbon dioxide equivalent (CO2e) in 2017. With the introduction of China’s national ETS expected in July 2017, the total carbon emissions covered is expected to reach approximately 7,425 Mt CO2e. Does this recent development in ETS offer opportunities or threats to Hong Kong?