BEIJING May 6 China will launch its first
carbon-linked financial product on Thursday, a debt note linked
to the performance of carbon offsets on the Shenzhen Emissions
Exchange, issued by a unit of China General Nuclear Power Group
The launch will be a first test of financial market
confidence in China's emerging emissions markets, as trading
houses generally consider outright trade in carbon permits
unattractive, since it is limited to spot deals.
CGN will invite investments of up to 1 billion yuan ($160
mln) in the medium term note, the company said. The note will
mature after five years.
"We see a market potential for companies to finance
mitigation activities with these new products," said Cui Xuelai,
a broker at Shanghai Pudong Development Bank, which will sell
"We are looking at carbon futures and other financing tools
like green bonds, but it depends on how the carbon market
performs," she told Reuters.
Shenzhen is among the six cities and provinces in China to
have launched carbon markets amid efforts by the world's biggest
emitting nation to cut climate-changing greenhouse gases.
By 2020, China aims to rein in greenhouse emissions per unit
of GDP to 40 to 45 percent below 2005 levels.
In the Shenzhen market, companies whose carbon dioxide
emissions exceed limits set in government permits must bridge
the gap by buying permits from other scheme participants.
But they can also opt for cheaper carbon offsets issued by
the central government to projects that can prove they have
The CGN subsidiary, a wind power unit, has five wind
projects that can generate up to 377,000 offsets per year if
approved by the government.
The product's future value will be decided by a combination
of a fixed rate, to be announced on Thursday, and the floating
price of offsets from the five wind projects, as traded on the
Shenzhen Emissions Exchange.
Shenzhen-based CCAM and Australia-headquartered Climate
Bridge, two carbon specialist firms, have bought the offsets
from CGN on a forward basis at an undisclosed price, but will
sell them on the exchange when they are issued.
China's domestic carbon offset market is brand new, with
just two projects having won government approval to supply
offset credits so far.
Emission permits trade at 70 yuan in Shenzhen, the highest
price in all the Chinese markets, although officials have
confirmed there was no shortage of permits in 2013, the scheme's
Liquidity in the six regional markets, all launched within
the past 10 months, is modest. But the national market China
plans to roll out by the end of the decade is potentially the
(Reporting by Kathy Chen and Stian Reklev; Editing by Clarence