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LettersHow China’s zero-carbon factories can shape future of manufacturing

Readers discuss the significance of turning carbon emissions into measurable assets, American expertise in China, and making Hong Kong beautiful

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An employee patrols a Jiangsu Yueda Textile Group factory in Yancheng city, east China’s Jiangsu province, on July 25. Once a factory’s carbon reductions, renewable electricity usage and other sustainability indicators are certified by third parties as standardised assets, investments such as energy-saving equipment, previously regarded as pure costs, can begin to qualify as assets. Photo: Xinhua
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The European Union’s Carbon Border Adjustment Mechanism entered into force on January 1, exposing export-oriented companies in China to the shock of rising carbon costs. Estimates suggest Chinese steelmakers will face additional export costs of up to 690 yuan (US$102) per tonne of steel, reducing their price competitiveness.

Also in January, five Chinese government agencies jointly issued the Guiding Opinions on Promoting the Construction of Zero-Carbon Factories. The purpose of this isn’t to impose more environmental burdens on manufacturers; rather, it is to establish a “green balance sheet” that transforms carbon emissions from an external cost into a measurable and recognisable asset.

The deeper economic function of turning emissions into measurable assets lies in addressing information asymmetry with regard to the ownership and valuation of environmental rights. Once a factory’s carbon reductions, renewable electricity usage and other sustainability indicators are certified by third parties as standardised assets, investments such as rooftop solar panels and energy-saving equipment, previously regarded as pure costs, can begin to qualify as balance sheet assets.

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