Insight briefing - Shaping China's Climate Finance Policy

Reading time: 20 minutes
22 March 2013

China will need to raise up to US$243 billion of additional funds per year by 2020 in order to adequately finance action to curb the impacts of climate change and invest in low carbon development according to our latest report, which was commissioned by the Chinese Government’s powerful National Development and Reform Commission(NDRC) and co-authored by the Research Centre for Climate and Energy Finance at the Central University of Finance and Economics.

The report calls for a two stage plan to reform China’s climate finance mechanisms by 2020.

The report is the final of a series of reports, papers and other research The Climate Group has produced as part of its role in advising Chinese government institutions in restructuring the Chinese economy according to what senior officials call “green industrialisation” principles. It is soon to be presented to the NRDC, the Ministry of Finance and other top Chinese government entities.

In one of the first efforts to quantify China’s climate finance needs, the report’s authors estimate that achieving China’s 2015 and 2020 emission intensity targets (a 17% cut vs 2010 levels and a 40-45% cut vs 2005 levels respectively), will require a total investment of up to US$333 billion by 2015, escalating to US$413 billion by 2020.

Current public and private funds are not sufficient to cover the required investment, resulting in a financing “gap” of around 2% of China’s projected GDP in 2015 – or up to US$214 billion - increasing to US$208-243 billion by 2020.

Plugging this gap will depend on both increased public sector finance, but also on a larger role for private sector financing especially after 2015. To ensure this happens, China will need to create the framework and incentives that can leverage large amounts of private finance using the still significant – and increasing – levels of public funding.

To explore further, read the English briefing of the report now. A full report is also available in Mandarin on our Chinese website.

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