The Green Team Speaks to Meng Meng

The energy leader discusses carbon trading, green finance innovation, and the future of China's national carbon market.

Meng Meng is President of Guangzhou Emissions Exchange and Secretary General of Guangdong Green Finance Committee. She participated in the launch of the Guangzhou Emissions Exchange, the biggest regional carbon market in China, and continues to oversee its operation. Meng Meng has joined several research studies to promote Guangdong’s green finance development. She has an M.S. degree in Environmental Management from Xiamen University.

Since its launch in December 2013, Guangdong’s regional carbon market has become the largest in China and the third largest in the world. We learned that Guangdong’s carbon emissions trading was minimally affected by the COVID-19 pandemic in the first half of 2020 and has maintained strong momentum in terms of the trading volume and quantity. What do you think is the main reason behind the operational stability of the carbon trading system in Guangdong and the impressive results of emission reduction? What role did the Guangzhou Emissions Exchange play?

MENG: The development of a carbon emissions trading system is an important action item for Guangdong on the path toward achieving its goals for addressing environmental concerns and climate change. The province ranks first in China in terms of GDP, and while it has a full range of industrial sectors, there are regional disparities in development, which underly the establishment of the regional carbon market that covers about 70% of the total carbon emissions in the province. Guangdong implements tight control for carbon emission allowances with paid allocation and emphasizes transparency and strict supervision, which has greatly increased awareness of carbon emission control and carbon asset management among industry.

Guangzhou Emissions Exchange is the only designated trading platform for Guangdong’s carbon market and thus designs the rules for carbon trading, implements transactions, and assists with market supervision. As an important institution that supports Guangdong’s carbon trading system, Guangzhou Emissions Exchange has provided a fair and transparent trading platform for Guangdong’s carbon market by establishing a good market environment, forming market-based prices, developing innovative carbon financial products, and attracting investors at home and abroad. The Guangdong carbon market ranks first in China for trading volume and turnover and is second in the world in terms of spot trading volume.

Once trading, China’s national carbon market will become the largest carbon emissions trading system in the world. However, challenges remain in terms of liquidity, transparency, and financial innovation. In your opinion, what lessons can be learned from the Guangdong pilot program?

MENG: Guangdong's carbon market can provide some meaningful lessons for the national carbon market since it has been operating for seven years. For instance, Guangdong made substantial efforts in gaining knowledge of how paid allocation for carbon emission allowances impact the market as well as in maintaining policy stability, advocating for market openness and transparency, and promoting carbon finance in support of the real economy.

The Guangdong carbon trading system has indeed played a role in facilitating energy-saving and emission-reducing among businesses and led to greater awareness among industry players that they should be making efforts to implement technological solutions and carbon asset management to address their carbon footprint. In Guangdong's carbon market, more than 80% of enterprises have carried out technological retrofit to improve energy efficiency and reduce carbon emissions for their main industrial products.

Guangdong's carbon market can provide some meaningful lessons for the national carbon market since it has been operating for seven years.

Another lesson from Guangdong's carbon market experience is that a fair and transparent market along with a wealth of carbon financial products can help to develop a pricing mechanism and improve market liquidity. As of August 2020, Guangdong's trading volume of carbon emission allowance reached 156 million tons, with total turnover of over 3.1 billion yuan, ranking first in China. By using innovative carbon financial products, such as collateralized finance and repurchase of carbon emission allowance, businesses have raised more than 242 million yuan.

One other point, Guangdong has developed a market-based ecological compensation mechanism by encouraging forest-based carbon projects to be traded on Guangdong’s regional carbon market. The projects and the forestry carbon credits generated come from remote and poverty-stricken areas, where there is a high priority for natural resources protection and economic development opportunities for locals. In 2019, the enterprises involved in the Guangzhou regional carbon market purchased forestry carbon credits totaling 1.15 million tons of carbon emission, which brought over 12 million yuan in revenue to the areas. This has proved an effective experiment in providing financing solutions in support for ecological protection and poverty alleviation.

Cuiheng National Wetland Park in Zhongshan city, Guangdong Province

Guangzhou Emissions Exchange is a leader in carbon and green finance products and services innovation by exploring inclusive carbon trading for the forestry industry and promoting market-based ecological compensation mechanisms. Can you share some highlights about those innovations and preview some new developments in the pipeline that you and your team are working on?   

MENG: In terms of carbon finance innovation, Guangzhou Emissions Exchange launched several carbon financing products to reduce risks and increase liquidity, like carbon forward trading, carbon asset trusts, repurchase and collateralized finance of carbon allowances. These have provided diversified carbon financial services for the participants of Guangdong’s carbon market.

When looking at green finance innovation, Guangzhou Emissions Exchange participated in research conducted on China’s national green finance standards led by the green finance standing working group at China Financial Standardization Technical Committee. They placed a particular focus on the standards for carbon financial products, environmental equity financing instruments, green funds, and environmental information disclosure for financial institutions. In addition, Guangzhou Emissions Exchange actively promotes local green finance standards.

With regard to natural resources finance, Guangzhou Emissions Exchange is facilitating ecological valuation through the following:

  • Establishing a market-based ecological compensation mechanism that allows for forestry and other natural resources to be traded as carbon offsets in Guangdong’s regional carbon market.
  • Developing methodology for carbon inclusion projects to provide technical guidance and encourage forest carbon projects to be developed and traded that would address environment and social concerns in forested areas.
  • Building a market-based ecological compensation platform to provide financing channels for ecological compensation projects.

Foshan, China is located in the Guangdong-Hong Kong-Macao Greater Bay Area where many people live near the water.

In order to promote the development of the Guangdong-Hong Kong-Macao Greater Bay Area, the People's Bank of China (PBOC) and three other ministries recently released policy aimed at promoting cooperation for green finance in the Greater Bay Area. What specifically will the Guangzhou Emissions Exchange do to implement the cooperation? What are the next steps?

MENG: The PBOC and three other ministries jointly issued the Opinions on Using Finance to Support the Development of the Guangdong-Hong Kong-Macao Greater Bay Area on May 14, 2020. It mentions the Guangzhou Emissions Exchange platform as a foundation for building similar platforms for the Greater Bay Area.

Our priorities will be to accelerate construction of the environmental rights exchange, conduct research into establishing a platform for green finance innovation, and build a market-based ecological compensation platform.

By bringing together Guangdong’s commitment to facilitating green finance development in the province and the high-level emphasis of high-quality green economy development in the Greater Bay Area, Guangdong plans to leverage its leading position in carbon emissions trading to build a Greater Bay Area Environmental Rights Exchange in addition to Guangzhou Emissions Exchange.

For the next steps, our priorities will be to accelerate construction of the environmental rights exchange, conduct research into establishing a platform for green finance innovation, and build a market-based ecological compensation platform.

As a leader in China’s carbon market and green finance, how do you advocate and practice green and low-carbon behavior in your life?

MENG: Having worked in the low-carbon industry for many years, I have incorporated low-carbon and green concepts into my daily life, such as green travel, no food waste, garbage sorting, and water and electricity saving. I also buy carbon credits for myself and my family in order to be carbon neutral, use green electricity to support renewable energy development, and choose products with green labels and low-carbon attributes, even if they are more expensive, to support the popularization of carbon labels.

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Cuiheng National Wetland Park in Zhongshan city, Guangdong Province

Foshan, China is located in the Guangdong-Hong Kong-Macao Greater Bay Area where many people live near the water.