Hong Kong Exchanges and Clearing Limited (HKEx) published its Consultation Conclusions on Certified Emission Reduction (CER) Futures today (Tuesday).

Having considered the market responses and analysed the current facts and circumstances, HKEx considers that there is no imminent need for a CER futures market in Hong Kong.  Nevertheless, as HKEx reckons the carbon emission markets may become more important in the long run, it will continue to monitor the development of emission policies on the Mainland and in other markets and will consider revisiting the product concept of CER futures if circumstances change.

On 26 June this year, HKEx published a consultation paper on CER futures to seek market comments on the product concept of CER futures and the feasibility of developing a carbon emission trading platform in Hong Kong.

HKEx received a total of 24 submissions from financial intermediates (carbon trading desks from investment banks and a financial services company), Clean Development Mechanism (CDM) project advisory companies, carbon trading companies, industrial and professional associations, utility companies in Hong Kong, an overseas governmental body and two individuals.  HKEx did not receive any submissions from Exchange Participants, CDM project developers or compliance buyers.

Most respondents indicated that they believed CER should be the core carbon emission product in Asia, but there was uncertainty as to whether Hong Kong was the right place and as to the right development timeframe.  A few overseas carbon market players indicated interest in a CER futures trading platform in Hong Kong but the number did not suggest a critical mass was likely for the development of trading liquidity.

“Given the Hong Kong investing community’s low knowledge and experience levels in carbon emission trading and Mainland China’s restrictive policy in approving CER origination, HKEx concludes that there is no imminent need for a CER futures market in Hong Kong,” Calvin Tai, HKEx's Head of Derivatives Market, said.  “If any policy changes arise in future that seem favourable for Hong Kong’s development of a carbon emission trading platform, HKEx will revisit the product concept of CER futures."

The Consultation Conclusions can be downloaded from the "Market Consultation - Consultation Conclusions" section of the HKEx website.