Asia's first carbon hub: Hong Kong closing in on Singapore

Rivals are 'neck and neck' in race for global trading role, says expert
Jessica Cheam, Straits Times 30 Sep 08;

SINGAPORE and close rival Hong Kong are 'neck and neck' to claim the title of Asia's first carbon trading hub, said an industry expert.

While Singapore was ahead a year ago, Hong Kong is fast catching up and might clinch the title, said Mr Shane Spurway, head of carbon banking at Fortis Bank.

Hong Kong's location gives it an advantage as it is so close to China, said Mr Spurway. And although Singapore has been more pro-active in setting up carbon trading infrastructure, Hong Kong is rapidly beefing up its own.

Hong Kong announced in June that it had established the legal framework to allow projects that could sell on their reductions in carbon emissions, added Mr Spurway.

Singapore had already put this in place as it ratified the Kyoto Protocol in 2006.

Recently, a new trading platform called the Singapore Mercantile Exchange (SMX) was also announced. This will allow local investors to buy and sell carbon credits for the first time when it is operational next year.

Hong Kong's growing interest is due to its search for other revenue streams to support its financial industry, said Mr Spurway. But it is difficult to say who will emerge in the lead, he added.

Mr Spurway, who was speaking to The Straits Times last week on a range of carbon issues, also touched on eco-financing in Asia.

These are projects, regulated by the United Nations under a Clean Development Mechanism set up under the Kyoto Protocol, that generate carbon credits. One credit is one less tonne of carbon dioxide emission produced.

The credits are then traded and bought by firms, normally from Europe, which have to comply with reduction targets on greenhouse gas emissions.

Industry leaders such as Mr Edwin Khew, chief executive of waste-recycler IUT Global, have noted that banks - especially local ones - do not have a good understanding of carbon projects.

The result is that good projects cannot get kick-started without seed money.

Mr Spurway acknowledged the problem but said that banks needed to have their 'checks in place'. 'They need track records and proven balance sheets to grant funding, so as to protect themselves,' he said.

He foresees that 'carbon specialists' will emerge to bridge companies' ideas with financial institutions.

The carbon market also 'really needs entrepreneurs and investors to come in', as there are many good ideas being generated, but these need to be commercialised and brought to market, he said.

Ultimately, the carbon market will go into full swing only when 'America joins the party', he said.

It is likely that whoever wins the upcoming presidential election will set up a cap-and-trade system, like those in Europe, to impose industry targets, he said.

Asia's role is extremely crucial as it is a major supplier of carbon credits.

Considering that the bulk of emissions until 2030 will be coming from Asia, 'it's even more important to make industries more efficient. And that's where carbon trading comes in', he said.