Green Finance Dashboard

China’s national carbon market was officially launched in July 2021. Although the market only covers China’s power sector, it still constitutes the largest carbon market in the world. By the time the market incorporates its top polluting industries–electrolytic aluminum, cement, iron and steel, petrochemical, chemicals, papermaking and aviation–it will have put a price on nearly 80% of China’s emissions. A key challenge for the market is that prices are well below levels that are needed to change behavior. In 2022, average prices traded around 55.30 RMB, or $8.02 USD. In contrast, the IMF has estimated global average carbon prices need to reach at least $75 USD by the end of the decade to meet the Paris emissions goals.

Biodiversity protection is an increasingly salient issue in China. The country’s rapid economic growth and urbanization in recent decades have led to widespread habitat loss and nature degradation. In an effort to reverse this trend, China’s leaders are stressing the link between biodiversity and economic growth, and taking new efforts to protect nature. In 2021, China assumed the presidency of the 15th Conference of Parties (COP15) to the Convention on Biological Diversity, announced new conservation efforts, including the creation of the Kunming Biodiversity Fund, the establishment of China’s first national park system, and new financing for nature.

China aims to have 80% of the country’s total energy mix from non-fossil fuels by 2060. This will require a rapid transition away from coal, and massive investments in renewables and other clean energy technologies. China today is already leading the world in renewable energy capacity, and is making substantial investments for the future.

China is one of the world’s largest markets for green bonds, having reached a total of $212.8 billion stock by the end of 2022. At the same time, it is experiencing a positive trend in ESG investing. This has been led by a strong government approach which emphasizes green finance as a strategic priority. China will need 487 trillion RMB (around $77 trillion) in green investment in the next 30 years to meet its carbon neutrality goals.

China today is the world’s largest carbon emitter. Its emissions have tripled in the past three decades, and surpassed the US in the mid-2000s. In 2019, it accounted for 27% of global emissions–more than the combined emissions of the developed world. China’s emissions are largely driven by its heavy reliance on coal for its heating and electricity.