ESG-focused boutique Ben McQuhae & Co has become the first offshore buyer of China's carbon emissions offset credits in a bid to help demonstrate the scheme's 'enormous market potential' and promote Hong Kong as an emissions trading centre.

The firm teamed up with former Hong Kong undersecretary for the environment Christine Loh to purchase nearly 10,000 tonnes of China Certified Emission Reductions (CCERs) units from an ecological solar energy, sand control and power generation demonstration project in the Kubuqi Desert run by China's Elion Group. The deal was facilitated by AEX Holdings, which aims to build a neutral carbon offset trading platform in Hong Kong.

China’s much-anticipated national emissions trading scheme – the largest in the world – began operating last month. Its ‘cap and trade’ model is initially confined to coal- and gas-fired power companies, which are issued with emissions allowances they can either trade or purchase depending on their carbon footprint.

According to Asia-based magazine The Asset, the Elion project didn't receive the CCERs from the government because the registry was suspended in March 2017. They were instead acquired ‘on the expectation that China will resume issuing the credits next year and that some new-energy projects are likely to meet global standards. This means that for overseas investors, the Chinese carbon trading market is basically a leap of faith in its current stage of development.’

Ben McQuhae & Co founding partner Ben McQuhae said: “High integrity carbon credits are essential to the voluntary carbon market and the net zero carbon transition. For us, climate action speaks louder than words and I am really happy to contribute to driving this important agenda by helping design and close this first trade. Solutions require innovation and for that I congratulate our partners AEX and Elion.”

The credits, whose price was undisclosed, will easily offset Ben McQuhae's emissions, given that it estimates each member of the team has a carbon footprint of 3.39 tonnes per year and the boutique is already implementing a recently published Decarbonisation Strategy.

However, associate Jessica Ha said the primary purpose of the transaction was to demonstrate carbon trading's "enormous market potential – with the right projects, willing contracting parties and some thoughtful drafting". 

She added: "We want to put the spotlight on the importance of high-quality China originated carbon credits... and to demonstrate the important role offshore financial centres such as Hong Kong can play in developing the voluntary carbon market according to international best practices..."

McQuhae, a former partner at Jones Day, launched his practice in February with the goal of becoming the world’s first firm exclusively focused on sustainability law, working on transactions and other initiatives related to climate, biodiversity and innovation and choosing its work based on the UN Sustainable Development Goals.