The country's first carbon asset securitization product has been launched, and the carbon financial market has great potential| Rational look at carbon prices series ③
Not long ago, the "Shenzhen Guarantee Group·Nanshan District·Small, Medium and Micro Enterprises No. 19 Asset Support Special Plan (Carbon Assets)" was listed on the Shenzhen Stock Exchange. This is the first carbon asset securitization product listed nationwide, marking that Shenzhen has taken the lead in achieving a breakthrough in carbon asset securitization from "0" to "1".
The innovation of this approach is to transform carbon emission rights, an intangible asset, into tradable financial products through securitization, making them liquid and market value. This new carbon finance model was jointly created by Shenzhen Guarantee Group Co., Ltd., Shenzhen Ecological Environment Bureau, Nanshan District Financial Development Service Center, and Shenzhen Emissions Exchange.
Wei Wang, executive director of the Industrial Innovation Center for Comprehensive Environmental Management of Jiangsu Province, told reporters: "This can revitalize the transaction volume of social capital, allow funds to flow, and avoid stagnant water. More investors can participate in the carbon market, thereby increasing the liquidity and trading depth of the market. Highly liquid markets can more effectively discover prices, reduce price fluctuations, and enhance market stability."
What is the purpose of listing and issuing carbon asset securitization products?
Based on the development status of the national carbon market, attracting more investors and investment institutions to participate in transactions and stimulating market vitality has become the key direction in the next step.
Liu Jie, general manager of the Shanghai Environmental Energy Exchange (hereinafter referred to as the Shanghai Environmental Exchange), told reporters: "In line with the requirements of 'building a more effective, more dynamic and more internationally influences', the national carbon market has been built and operated for three years. Over the past year, the overall operation has been stable, but it still faces problems such as single industry coverage, single transaction elements, imperfect market adjustment mechanisms, and insufficient market activity, and further construction and improvement are needed. In the next step, the Shanghai Environmental Exchange will support the competent authorities in promoting industry expansion. On the basis of ensuring the smooth operation of the national carbon market, it will do a good job in institutional research, system preparation, trading account opening, consulting services, etc. related to expanding the coverage of the industry."
In order to enhance market activity and improve market mechanisms, Liu Jie introduced that as a trading institution, the Shanghai Environmental Exchange will focus on the trading market and strive to enrich market functions, including improving quota allocation methods, gradually introducing paid distribution, and implementing paid distribution and free distribution. A combined distribution method; Enrich the trading varieties, trading entities and trading methods in the carbon market, incorporate other key emission industries into the national carbon market in stages and steps, introduce investment institutions to participate in transactions, and use one-way bidding trading methods to gradually stimulate market vitality; in accordance with the "Carbon Emissions" Interim Regulations on the Management of Trading Rights (hereinafter referred to as the "Regulations") require strengthening market transaction supervision, studying and improving market transaction rules, and increasing trading activity; adhere to the basic positioning of the national carbon market as an emission reduction policy tool, and better leverage the financial attributes of the carbon market on the basis of preventing financial and other risks.
The listing of "Shenzhen Guarantee Group·Nanshan District·Small, Medium and Micro Enterprises No. 19 Asset Support Special Plan (Carbon Assets)" on the Shenzhen Stock Exchange is obviously a useful exploration to enrich the varieties, trading entities, and trading methods of carbon asset trading.
Green Innovation Carbon and Analysis, a comprehensive service provider providing urban carbon neutrality solutions, Shenzhen's exploration of carbon asset securitization expands the depth of the carbon market by introducing more types of investors (such as hedge funds, insurance companies and pension funds). These investors bring more capital and expertise, which helps the market mature and develop.
Wei Wang told reporters: Policy support is a key factor in the success of this product. The "Regulations", which will officially come into effect on May 1, 2024, clarify the carbon emission rights market trading system in the form of administrative regulations for the first time, laying the legal and institutional foundation for carbon asset securitization. It is an inevitable trend for stock exchanges to accept carbon asset securitization. For the national carbon market, it is necessary to enrich the categories and trading methods of product transactions. Trading methods include on-site trading, over-the-counter trading, transactions between market entities, etc. In fact, among the trading volume of the EU carbon market, over-the-counter transactions account for a very small proportion, and voluntary emission reduction transactions account for about 90%, which shows that this market is very active. In my country, the Beijing Green Exchange has built a unified national greenhouse gas voluntary emission reduction trading center to promote the development of voluntary emission reduction. If transactions in this trading center become active, it means that more diverse market entities will participate in the carbon market, which will help improve the ability to discover carbon prices.
He pointed out, but we should also note that at present, in my country, the introduction of carbon assets into the securities trading market must be carried out under the guidance of the government and cannot be completely handed over to the market. Excessive carbon prices are likely to squeeze the development space of the industry and place a great burden on enterprises. In contrast, why can the EU carbon price be left to the market for discovery? Because it has formed a mature market. In 2023, the value of EU carbon market transactions has reached approximately 770 billion euros, accounting for 87% of the global carbon market transaction volume.
Develop carbon assets in various forms, and the carbon financial market has great potential
In addition to carbon asset securitization, my country currently has many useful explorations in the development of carbon assets. For example, there have been many pilot cases in green asset pledge loans.
In April 2023, China Construction Bank Kunshan Branch completed a single carbon emission rights pledge loan and issued a working capital loan of 19 million yuan to Kunshan GCL Blue Sky Distributed Energy Co., Ltd., adopting a third-party guarantee method, and adding an additional 8000 tons of carbon emission rights pledge, carried out innovative attempts in the field of green financial services.
At the end of 2023, Hubei Province Branch of the Export-Import Bank of China actively responded to corporate financing needs and successfully provided a 600 million yuan carbon emission rights pledge loan to a large enterprise in Yichang City. This loan is the first carbon emission right pledge loan with a financing amount of more than 100 million yuan since Hubei Province launched carbon finance innovation business based on pre-allocated quotas. It was selected into the first batch of green finance innovation practice cases in Wuhan City.
On July 4, 2024, the "China Carbon-Industrial National Carbon Market Carbon Emission Quota Spot Defeiting Price Index" jointly developed by Industrial Bank and China Carbon Deng was officially released. This index uses the carbon quota pledge business of a number of commercial banks and carbon asset management companies as data sources, and is weighted based on the monthly average transaction price in the carbon market and the monthly average mortgage price of carbon emission rights pledge projects to accurately reflect the overall trend of the market.
There are many examples like this. As Pan Gongsheng, Governor of the People's Bank of China, said at a symposium on green financial services for the construction of a beautiful China jointly held by the People's Bank of China and the Ministry of Ecology and Environment in May this year, with the development of the national carbon market, carbon finance has great potential, and the positive role of the carbon market in financial attributes such as price discovery and risk dispersion should be given full play.
Liu Jie told reporters: "The carbon price formed by the carbon market anchors the benchmark price reference for carbon pricing activities such as climate investment and financing and carbon asset management, promotes the innovation of climate investment and financing tools, and provides low-carbon, zero-carbon and negative carbon technology investment and financing provides basic support and financial support, promotes the low-carbon and high-quality development of the whole society, and promotes the low-carbon and high-quality development."
The "2023 White Paper on Innovation and Development of China's Carbon Finance" released by KPMG predicts that the scale of my country's carbon finance-related market will reach 10 trillion yuan in the future, and core elements such as market coverage entities, covered industries, and product types will be gradually enriched.
In March 2024, the "Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development" jointly issued by the People's Bank of China and the Ministry of Ecology and Environment pointed out that research should enrich financial products and trading methods linked to carbon emission rights, and gradually expand the scope of trading entities suitable for my country's carbon market development.
Wei Wang believes that in the future, we can also explore ways such as investing in green equity to improve the liquidity and value discovery capabilities of carbon assets. "High liquidity can make prices more rational. Prices such as daily necessities, rice, oil and salt usually do not fluctuate very much because transactions are frequent and can more sensitively reflect the market supply and demand relationship. A flowing market is usually a rational market that can form a reasonable match between supply and demand." In addition, he believes that there is no shortage of opportunities in the carbon asset field, but what is lacking is discovery capabilities. Carbon assets are essentially virtual assets and require professional planning and exploration.
