Preface
Under the background when low-carbon and environmental protection have become the global focus, China has also put forward the goal of striving to achieve "carbon-peak" in 2030 and "carbon-neutral" in 2060.
Aiming at this goal, corporates in high energy-consuming industries turned to green power as an alternative of traditional energy sources like oil and carbon; corporates began to track the carbon footprint of their products throughout the life circle of each product in order to spot certain procedures during the business operation where measures can be taken to lower the carbon produced; corporates have also paid attention to preparing their ESG (Environment, Society and Governance) report at year-end which demonstrates the achievements the corporate have made for the last year in aspects including but not limited to being more “green”.
As one of the major ways to incentivize carbon reduction, the Chinese government has felt its way in setting up pilot regional carbon emission trading schemes (ETS) in 8 different cities around China, which has attracted significant interest from many industry participants, financial institutions, and trading houses etc.
In the year 2021, along with the launch of the national ETS on 16 July, a regional/national double-layer ETS has been established successfully. People believe there is a huge market potential behind China ETS and carbon financial products.
Revolving around the carbon emission right, a variety of financial products come down the pike. The Chinese government also takes an encouraging attitude towards these carbon financial products. For instance, the green loan is used for reducing the costs of financing and promoting carbon emission duction; the green bonds create incentives to invite capital inflow into the carbon market; carbon funds can absorb capital from the whole society; carbon insurance is used to hedge certain potential risks that any participants in the PRC ETS can face; and the carbon swap is a useful measure to lock-in the capital price, etc.
At present, the carbon financial products still have some uncertainties regarding the benefits they can bring and the potential risks they have. Most of the carbon financial products listed above are still in trial and exploration. The picture could be much clearer as the PRC ETS and relevant financial products develop.
This handbook (1) provides a comprehensive overview of the practical interpretation of carbon emission trading, carbon products (such as mainly carbon emission allowance and Chinese Certified Emission Reduction) and carbon financing, including but not limited to green loans, carbon mortgage/pledge, carbon funds, carbon insurance, carbon futures, carbon forward from a legal perspective and also (2) supplements some example cases to help elaborate the possible major legal issues in carbon-related projects and how to address them.
