IFC, a member of the World Bank Group, has signed a memorandum of understanding with the Shenzhen Emissions Trading Exchange to develop products that will help increase the volume of trades, create more business opportunities, and contribute to mitigating climate change.

China, the world’s biggest emitter of greenhouse-gas emissions, is working to cut its carbon emissions by implementing emissions trading schemes. Last year, the country initiated seven emission trading pilots at provincial and municipal levels, and Shenzhen was the first city to begin an emissions trading scheme.

 

“With IFC's networks and resources, the exchange can develop an advanced carbon trading mechanism and design innovative trading products”, said Peggy Chen, chief executive officer of the Shenzhen Emissions Trading Exchange. “Moreover, this cooperation will help us to improve our overall capacity in product design, market promotion and risk management, which will lift the exchange's operations to the next level.”

Emissions trading will add a cost of carbon for borrowers and bank clients that emit carbon dioxide. It allows those who significantly reduce emissions to sell carbon credits in the market. The memorandum marks IFC’s first venture into China’s emissions trading schemes, beginning with the pilot in Shenzhen, to encourage emissions trading and increase investment opportunities. It lays the foundation for IFC to work with other pilots at the local and national levels, and for IFC to work with other burgeoning emissions trading systems in emerging markets.

“Today’s agreement will strengthen the carbon emissions trading market in Shenzhen,” said Tania Lozansky, IFC’s regional head of advisory services in Asia-Pacific. “It marks a new chapter in IFC’s efforts to help mitigate climate change and allows China’s private sector to profit from these opportunities.”

Some 635 companies and 26 industries are covered by the Shenzhen exchange. Shenzhen is a special economic zone in China’s southeast and is one of the mainland’s leaders in environmental protection. It has one of the world’s largest fleets of electric vehicles and is also China’s leading city in the implementation of star-rated green buildings.

 

Since 2006, IFC has worked in the sustainable-energy-financing space in China, providing loans worth $783 million through its partner banks to 178 energy-efficiency and renewable-energy projects, which cut more than 18.6 million tons of greenhouse-gas emissions a year.

IFC's carbon trading programme is supported by the governments of Norway and the Netherlands.