Page 146 - Low Carbon Development in China and India
P. 146
On the contrary, when the future CER prices are expected to fall, the 2.2
seller will buy put options to lock-in profits.
Securitization of carbon financial assets means that investment
banks or other financial institutions put carbon assets into a carbon
assets pool. This is then utilized for cash flow generation by using
carbon assets pool as a guarantee to issue securities in the financial
markets for raising funds. The respective assets in the assets pool could
consist of CDM projects, carbon emission right pledge loans from
commercial banks, finance lease of carbon emission right, corporate
payments receivables related to carbon emission, and bank profiteering.
Securitization of carbon financial assets has improved the liquidity of
the carbon assets and transferred risks, thus being conducive to the
development of the carbon financial derivatives market.
With increase in the world’s carbon emissions trading, major
trading countries will establish the emissions trading system one
after another. China should also actively develop a carbon derivatives
market, and use diversified modes of the derivatives market to provide
better services for trading in the carbon financial market. At the current
stage, although China has established a number of carbon emission
right exchanges and a number of carbon futures exchanges, carbon
derivative financial instruments suited to China’s market have not yet
been developed. The carbon financial services provided by financial
institutions in China are now mainly focusing on consulting, carbon
emission right purchase agents, and transaction settlement.
2.4.3 Innovation of Traditional Financial Market Instruments
China’s financial industry is still in the early stages of development
and its credit market is the most important source of funding for
enterprises in the country. However, in the field of climate financing,
the role of the traditional financial markets has not yet been fully
played, and climate-related projects are not the most popular areas for
investment. Although the China Banking Regulatory Commission has
vigorously promoted green credit, green loans still account for only an
insignificant proportion of total lending. Having said this, however,
it is important to note that the debt-financing and equity-financing
market is developing rapidly, although still relatively small. In many
cases, the development of an urban low carbon economy still faces
difficulties in seeking financing from the traditional financial markets.
To promote the provision of more climate funds by traditional
financial markets, we must rely on clear investment signals, complete
policies, improved vigour and vitality of financial intermediaries,
Chapter 2 Innovative Financing for Low Carbon Development 111
seller will buy put options to lock-in profits.
Securitization of carbon financial assets means that investment
banks or other financial institutions put carbon assets into a carbon
assets pool. This is then utilized for cash flow generation by using
carbon assets pool as a guarantee to issue securities in the financial
markets for raising funds. The respective assets in the assets pool could
consist of CDM projects, carbon emission right pledge loans from
commercial banks, finance lease of carbon emission right, corporate
payments receivables related to carbon emission, and bank profiteering.
Securitization of carbon financial assets has improved the liquidity of
the carbon assets and transferred risks, thus being conducive to the
development of the carbon financial derivatives market.
With increase in the world’s carbon emissions trading, major
trading countries will establish the emissions trading system one
after another. China should also actively develop a carbon derivatives
market, and use diversified modes of the derivatives market to provide
better services for trading in the carbon financial market. At the current
stage, although China has established a number of carbon emission
right exchanges and a number of carbon futures exchanges, carbon
derivative financial instruments suited to China’s market have not yet
been developed. The carbon financial services provided by financial
institutions in China are now mainly focusing on consulting, carbon
emission right purchase agents, and transaction settlement.
2.4.3 Innovation of Traditional Financial Market Instruments
China’s financial industry is still in the early stages of development
and its credit market is the most important source of funding for
enterprises in the country. However, in the field of climate financing,
the role of the traditional financial markets has not yet been fully
played, and climate-related projects are not the most popular areas for
investment. Although the China Banking Regulatory Commission has
vigorously promoted green credit, green loans still account for only an
insignificant proportion of total lending. Having said this, however,
it is important to note that the debt-financing and equity-financing
market is developing rapidly, although still relatively small. In many
cases, the development of an urban low carbon economy still faces
difficulties in seeking financing from the traditional financial markets.
To promote the provision of more climate funds by traditional
financial markets, we must rely on clear investment signals, complete
policies, improved vigour and vitality of financial intermediaries,
Chapter 2 Innovative Financing for Low Carbon Development 111
