A sign reading “fossil fuels out” is displayed during a demonstration at COP27 on November 12 in Sharm el-Sheikh, Egypt. Simon Stiell, UN climate chief, acknowledges nations didn’t do anything additional to address climate change itself at the meeting. Photo: AP
Opinion
Ken Chu
Ken Chu
COP27 loss and damage deal: throwing money at climate change is not enough
From loss and damage to carbon trading, money can be an incentive for climate action, and Hong Kong can play a major part as a centre of climate finance
But this is not enough. Polluters must agree to cut emissions, and technology must be harnessed to boost the climate fight
At COP26, the UN climate change conference held at Glasgow last year, countries agreed that the world needed to keep the global temperature rise to within 1.5 degrees Celsius above pre-industrial times, to prevent an imminent catastrophe.
One of the gravest consequences of unchecked global warming and carbon emissions is a rapid rise in the sea level, which could leave major coastal cities, including Hong Kong, submerged before the end of this century. The recent COP27, held in Sharm el-Sheikh, Egypt, was to be a platform for countries to hammer out concrete plans to tackle climate change and deliver on the 1.5-degree pledge.
Unfortunately, the conference ended with no significant breakthrough on the issue of curbing the use of fossil fuels to reduce greenhouse gas emissions to meet the 1.5-degree target. Some environmentalists had cautioned earlier that COP27 was doomed from the start to be overshadowed by Russia’s war on Ukraine.
The resulting global economic fallout, with looming inflation and recession fears, have also caused some nations, in particular developing countries, to continue to rely on fossil fuel to power their economic development for now.
But there is no time for despair. In the global battle to arrest climate change, every action, however small, contributes towards overcoming this formidable challenge.
One significant agreement concluded at COP27 was to set up a fund to compensate for the loss and damage in countries suffering from climate change, although practical details remain vague. The plan highlights the fact that money, if not the sole means, provides an incentive to address the adverse consequences of climate and environmental issues.
A demonstrator at COP27 on November 12 in Sharm el-Sheikh, Egypt. Photo: AP
Indeed, the world has not lost sight of the importance of deploying funds in the strategy against climate change. Over the years, many new ideas and tools surrounding climate finance have evolved.
The concept of climate finance started gaining traction as far back as the 1992 Rio Earth Summit. Climate finance, which generally refers to the leveraging of financial resources and investment tools to address climate change issues, has come a long way.
Today, there are a variety of well-developed concepts, initiatives and tools available to address climate and conservation issues, such as environmental, social, and corporate governance (ESG) investing, compulsory climate risk disclosures, sustainable investments and carbon trading.
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Carbon trading essentially began with the 1997 Kyoto Protocol. Encapsulating human ingenuity in addressing a global crisis, carbon trading refers to the buying and selling of credits or permits that allow the holder to emit carbon dioxide. Carbon emitters, be it power companies or airlines, are initially assigned a certain limited quantity of carbon dioxide that they can produce over a prescribed period.
If an emitter produces less carbon dioxide than the given limit, it can sell the unused quantity in the form of credits on the carbon market to others who might need them to balance their carbon books. In this way, polluters have an economic incentive to mitigate carbon emissions.
If climate finance is the way to go, Hong Kong is well placed, given its established and well-oiled financial market, to make a contribution. It is therefore exciting to see that Hong Kong Exchanges and Clearing (HKEX) has set up Core Climate, an international marketplace for the trading of carbon credits and other instruments of climate finance.
In Hong Kong, there is a saying that a problem that can be solved by money is not really a problem at all. And it’s clear that developed nations are prepared to spend a good deal of their gross domestic product to achieve the goal of carbon neutrality.
But in reality, not every problem can be resolved with money. Even carbon trading has its flaws. For example, it allows stubborn emitters to buy their way out of making any real progress in cutting their carbon emissions, in giving them a licence to emit.
Success in combating climate change ultimately comes down to self-awareness, self-control and self-discipline. Many industries have adopted concrete measures to help preserve the environment and mitigate greenhouse gas emissions.
The golf industry offers a good example. Golf courses function as carbon sinks with their vast swathes of grassland. Criticised by some as environmentally unfriendly, many golf courses around the globe have inconspicuously and successfully taken steps to tackle environmental issues, such as by halting the use of chemical pesticides, reviving natural habitats to encourage wildlife and installing solar-powered lighting systems to create a sustainable oasis in a city’s concrete jungles.
I have no doubt that HKEX’s Core Climate will propel Hong Kong to establish itself as a leading sustainable financial hub and a centre of carbon trading. But I also hope that Hong Kong goes on to seek other ingenious ways, such as through big data and artificial intelligence, to aid the global fight against climate change. In this way, Hong Kong can further consolidate its role in the sustainable innovation and technology sector.
Ken Chu is group chairman and CEO of Mission Hills Group and a national committee member of the Chinese People’s Political Consultative Conference
